Copper Talking Points:

  • Copper prices took a tumble in June and July, setting fresh yearly lows and eventually finding support at the 50% mark of the 2020-2022 major move.
  • This morning’s trade has seen copper prices push up to a fresh five-month-high. And there’s some resistance potential nearby, as price is testing the top of a rising wedge formation that’s confluent with the 200 day moving average.
  • The analysis contained in article relies on price action and chart formations. To learn more about price action or chart patterns, check out our DailyFX Education section.

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Copper prices broke out this morning, at least temporarily, testing above the swing-high from a few weeks ago to mark a fresh five-month-high before pulling back. This continues a move that’s been working for the past few months following a nasty spill earlier in the summer.

Copper prices plunged in June and July, eventually setting a fresh yearly low just above the 600 psychological level. And bulls didn’t exactly jump on the matter, as August and the first-half of September brought ranging grind into the mix. But, buyers started to show back up in late-September, allowing for a series of higher-lows to develop which eventually led to a higher-high in November. The pullback from that move set yet another higher-low, and that’s led to this morning’s extension of the move.

At this point, there’s a bullish theme to work with but buyers have their work cut out for them, as the 200 day moving average sits just overhead. There’s also a bearish reversal formation at work with a rising wedge, often approached with the aim of bearish reversals.

Copper Weekly Price Chart

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Chart prepared by James Stanley; Copper on Tradingview

Copper Shorter-Term

Going down to the daily chart, we can see where the bullish trend of the past few weeks is somewhat prominent, leading into this morning’s fresh five month highs. And at this stage, both the near and intermediate-term trends are pointing higher, so there still remains topside potential. I’m tracking follow-through resistance at levels around 720 and 731. If bulls can evoke a push above those levels, the bullish trend will have better footing, which could allow for re-test of the 756 Fibonacci level.

The bigger question is whether copper can sustain a move back-above the 200 day moving average that sits just overhead.

The notable item in my opinion is how quickly bulls brought price back to resistance ahead of this morning’s breakout. This is a V-shaped reversal and that’s the type of move that can have some continuation potential. But – if it fails, that’s when bearish scenarios can become interesting, and the first thing that I’m watching for in that theme is a push-below the swing low at 694.65. A break below that opens the door for a test of 684.80 and then the Fibonacci level at 675.90. If that can’t hold the lows, and if price continues to break-below that, then we could be looking at a breach of the rising wedge which opens the door for bigger-picture bearish trends.

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Copper Daily Chart

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Chart prepared by James Stanley; Copper on Tradingview

— Written by James Stanley, Senior Strategist, DailyFX.com & Head of DailyFX Education

Contact and follow James on Twitter: @JStanleyFX





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