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Copper prices are surging on the metals market at the moment as the supply side struggles to keep up with the demand side. Copper is fast approaching the $400.00 resistance level, meaning that the metal is close to trading at levels not seen since 2012.
Recent data on the London Metals Exchange, commonly known as the LME, registered warehouses are at 74,675 tonnes. This low stockpile has created concerns about the overall availability of copper on the LME and is helping to create what is called “a premium” for cash copper in three-month contracts.
Additionally, the Chinese angle is also in play. China’s insatiable demand for the metal remains strong, even over the Lunar New Year. China has traditionally been forward thinking when placing orders for commodities, and particularly metals such as gold and copper.
Morgan Stanley has also noted that “the supply-side appears ill positioned” when referring to copper. Additionally, the rise in gold prices from the lows of last week is also providing tailwinds for the popular metals latest upside move.
Traders are also factoring in the US economic story, which is one of more stimulus and rising inflation in the United States by way of the incoming $1.9 trillion COVID-19 relief package. Infrastructure and alternative energy spending are also hugely bullish for copper prices.
With the all the mentioned factors the short and medium-term story looks particularly good for copper. Additionally, the $4.20 to $4.50 price area is seen on the technical front as a very viable short-term price target.
Once again the ActivTrader Sentiment Tool is calling the current move higher in Copper. Usually, the best way to trade this great indicator is to look for one-way sentiment skews that are going in the opposite direction of price.
The ActivTrader Sentiment Tool is currently showing that some 75 percent traders are leaning against the current move higher. Watch out the move higher to continue if the one-way bias continues.
Copper Short-term Technical Analysis
Looking at the lower time frame, a bearish head and shoulders pattern has recently been invalidated, following the recent move above the $370.00 resistance level.
According to the overall size of the invalidated head and shoulders pattern a move of around $30.00 should be expected to take place. I would therefore expect copper to start to push towards the $400.00 area.
Any dips towards the $373.00 to $370.00 area are likely to be used as a solid buying opportunity by copper bulls.
Source by ActivTrader.
Copper Medium-term Technical Analysis
Looking at the higher time frames, an extremely large inverted head and shoulders pattern will form if copper price reach the $400.00 benchmark level. The pattern has formed after the metal recovered towards the best levels of 2012.
According to the overall size of the bullish reversal pattern, copper prices could rise towards the $600.00 level if bulls start to take control above the $400.00 level.
Please note that extreme caution is advised being short copper above the $400.00 level.
Source by ActivTrader.
