Copper

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Date : 16th March 2015


COPPER’S RELATIVE STRENGHT DUE TO CHINA.

Copper is in a long term bear channel and moved in February to a level that has supported price in the past. This was also the first time since year 2008 that Money Flow Index moved into overbought zone in Monthly timeframe. In February 2007 price touched 2.40 level and moved higher over the next two years. Now there was another bounce from the same level and the price of Copper is on the rise for the second month in a row. The nearest resistance level is approx. at 2.72 while the next major resistance is at 2.88.





Copper, Weekly


Copper (an industrial metal) has been stronger performer than precious metals since the latest US Jobs report came in with a surprisingly high number and strenhgtened the US dollar. While Gold and Silver have declined by almost 3% since March 5th Copper has at the time of writing gained 1.1%. However, the US rate hike expectations mean the US dollar strengthens and buying power amongst non-USD based investors decreases for dollar based assets such as Copper. This combined with slowing economic growth in China slows down the Copper bulls and has caused the price to fluctuate below resistance levels. On the other the hand price has held up and even edged higher as market participants believe that easier lending conditions should improve demand in China, the biggest consumer of Copper globally. The price of copper has made two weekly lower highs since touching the 2.72 resistance level (a former support from June 2010) while the MFI (7) is overbought and Stochastics are close to the same levels and hinting that the momentum is waning. This could lead to further fluctuation between the 2.59 support and a high of 2.73 from couple of weeks ago. Other support levels are 2.55 and 2.40, a high and low of the January pivot candle high and low.





Copper, Daily


The price of copper is near to the upper Bollinger Bands and Stochastics is getting overbought. Price has just recently bounced from a support at 2.59 forming yet another higher low. This was technically a good sign as it confirmed the level that used to resist price moves higher is now a support. The fact that this level now coincides with the lower daily Bollinger Bands makes it more significant support area.


Conclusion:


Fundamental factors that both support the price of Copper and resist its move higher translate into a ranging market, price action that honours the technical levels at both ends of the range. Levels near to 2.59 support level used to resist moves higher and are now providing support while the move to 2.72 resistance was rejected. This suggests that short term traders should look for trade opportunities at or close to these levels while longer term position traders might want to consider longs closer to the 2.40 support and shorts closer to the 2.88 resistance levels. This is the likely range copper futures over the coming weeks and months as major news stories or surprises on either the US Federal Reserve’s rate policy or Chinese consumption of Copper they might provide the trigger to move the price of Copper to these levels. Chinese premier Li Keqiang commented that the government will be ready to support the Chinese economy should the slowdown in growth affect employment and incomes. He wasn’t specific on the measures the government might use but a hope of economic stimulus in China should support the price of Copper. Against this backdrop traders might want to be buyers near support levels rather than trying to find shorts. This view would be negated if the US Fed indicated that it would hike rates more than expected. However, it is likely that the Fed will be cautious in raising rates.


Janne Muta
Chief Market Analyst



Disclaimer: Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of purchase or sale of any financial instrument.

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Date : 7th May 2015 (Second Analysis)


COPPER TRADING AT RESISTANCE.





Copper, Weekly


In my previous report on copper (March 16th) I wrote that traders might want to be buyers near support levels rather than trying to find shorts as the Chinese premier Li Keqiang commented that the government will be ready to support the Chinese economy. The logic was that the hope of economic stimulus in China should support the price of copper. The price of red metal has since risen by 9.3% after testing the $2.55 support I identified in the same report. Then the $2.88 resistance created sizeable swing to the downside but was penetrated on a closing basis just few days ago. The world stock markets have been correcting lower pretty strongly this week.


Over the last couple of months investors have also been reasoning that with ECB printing Euros fund managers would need to allocate money to commodities. This has supported metals and especially copper lately. Now however the global equity markets are looking soft and with such a risk aversion in place we might see the price of copper being capped over the medium to long term.The MSCI World index, a global benchmark for equities, has fallen out of the rising weekly regression channel and created a shooting star in the monthly time frame (see my @HF_Analysis, ie my tweets for charts). MSCI World has been a good indicator on stock market tops in the past and the current action in the index points to higher volatility that should then be resolved to lower equity prices over the rest of this year. This is not promising for the price of copper in long term.


Currently copper is trading between support and resistance levels and it has reached proximity of descending long term trendline. Weekly lows from October last year at $2.95 resist moves higher. In addition, we have the 50 week simple moving average at $2.93, right at the at the current bid price. Stochastics are overbought and unless there is no strong movement to either direction today or tomorrow this week’s trading will create a doji candle. Should this week’s candle indeed become a doji the support at March high ($2.91) is more likely to be broken. The next weekly support level is at $2.83. If the $2.91 level holds then the next resistance is at $3.08.





Copper, Daily


Stochastics are overbought and now they are moving sideways as the last three days’ trading has been range bound. The support and resistance levels are pretty much the same as in weekly picture with $2.83 being the first level that is likely to attract buying should the 2.91 – 2.89 support break. After that the next levels to look at are the rising trendline and the $2.66 to $2.70 support range. However, if today’s trading finishes above the midway of the candle we have a candle that suggests further upward pressure. This would increase possibilities that the current consolidation is a bull flag that will be resolved in the direction of the original move. The next daily resistance levels are at 2.95, 3.01 and 3.08.





Copper, 240 min


Price has been finding support between $2.89 and $2.91 while the resistance is at $2.95 – $2.96 range. Such a tight range usually implies uncertainty in the market place and can lead to price reversing an earlier move. This far the bar lows have each been slightly higher than previous ones but should copper start making lower lows the downside risk would increase. Narrowing Bollinger Bands suggests that there will be a quick increase of volatility rather soon. At the time of writing Money Flow Index is oversold suggesting an intraday buy opportunity.


Conclusion


Copper is trading between a support and a resistance. The first reaction lower from this resistance area (in March) was quite strong creating a huge weekly shooting star candle. Now that the price has been able to move further into the resistance and has stayed above the March high we need to follow the price action closely to see if this support will hold. If today’s trading finishes above the midway of the daily candle we have an indication of further upward pressure. This would increase possibilities that the current consolidation is a bull flag that will be resolved in the direction of the original move. The next daily resistance levels are at 2.95, 3.01 and 3.08. However, please remember that because price is at longer term resistance easy money for longs has been made and long trades at current levels are not high probability trades. As a general rule I do not like to be a buyer close to higher timeframe resistance levels but would rather like to see a correction to daily support levels where I would be looking for price based confirmation for the long side bias. However, those wanting to trade aggressively short term or intraday could consider buying at levels close to intraday supports at 2.89 to 2.91 with less than usual gearing. If price breaks below the 2.91 support, we should be looking for short term opportunities on the downside (as per my teaching in the webinars) with targets at daily and weekly support levels. Also, the publication of US NFP report on Friday is getting near and this should be factored into all trading decisions.


Janne Muta
Chief Market Analyst
HotForex


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