Technical Analysis: Copper Popped as Expected, But…

In late November 2016, we noted copper was overdue for a higher move, thanks in part to a pick up in global manufacturing and infrastructure spending in the U.S.

We were hopeful for a rebound from $2.43 support, retesting a prior high of $2.733.

And that’s exactly what happened. 

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In fact, after catching support, momentum carried it to a high of $2.753, a high we haven’t seen since May 2015.  Speculators piled into the long side of the trade on Donald Trump’s promises to boost infrastructure spending.

Even aluminum prices jumped on the same speculative hopes.

However, with rally doubts emerging, coupled with a stronger U.S. dollar, the trend in copper has reversed to the downside.  If copper can hold current support around $2.50, the metal has a chance at pivoting higher and retesting prior highs.

Should copper break down, it could retest $2.426. 

What’s encouraging is that even with RSI and MACD reversing well off highs, Williams’ %R has bottomed out, signaling a potential for higher moves.  Again, though, it’s a wait-and-see.

What’s not encouraging is that inventories are up, having increased by 38,000 tons on Friday – the biggest increase since July 2001.  Given the increase in copper prices in November, we always had to assume we’d see price correction. 

We’re still waiting to see if $2.50 can hold here, though.

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