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Copper has moved back above the $400.00 benchmark level, following a brief price dip towards the $380.00 level. The move lower appears to be technically driven, and due to a recent risk-off move in broader financial markets.
The positive tones from financial markets this week, largely due to the US stimulus bill being approved, has helped boost the metal higher. Copper has been rising alongside silver and gold this week, typically, copper has no clear correlation with the price of gold.
Gold tends to rise on risk-off moves in market, geo-political instability, and QE being rolled-out by governments, while copper tends to fall on risk-off market moves, geo-political uncertainty, as it linked to the real economy.
We also need to consider that Chile is the largest Copper producer, while China is the biggest copper importer. These two components are worth watching closely. Demand for copper from China is essential for higher copper prices, while copper export data from Chile also helps to smooth the current picture for copper demand.
Recent data showed that in February demand for copper from China did not paint a bullish price picture, and actually came in weaker than expected, while copper export data from Chile hit extremely high levels in February.
This confusing dynamic could mean that copper demand is starting to come from outside China and could mean that copper traders have been cautious since the unexpected slip in demand for copper from the Chinese economy hit the wires.
Seasonal patterns are also worth watching extremely closes. Copper demand tends to bottom-out in December, while it starts to peak around late-spring time. Meaning that copper prices could still have further room to run higher, based on seasonality.
Analysts speculate that this pattern could be due to the buildup of inventories by miners and manufacturers as the building construction season begins in late-winter to early-spring. Automakers are also preparing for the new car model year that often begins in mid- to late-summer.
The ActivTrader Sentiment Tool is currently showing that 56 percent of traders are bearish towards copper. This could imply neutral, or range bound conditions are here to stay. Typically, a one-way sentiment skew is needed before a major new short-term trend commences.
Copper Short-term Technical Analysis
Looking at the lower time frames, a bearish head and shoulders pattern has played out to its full downside projection, and once the target was hit a significant bounce has then occurred.
A bullish price pattern has since formed, which is predicting fresh all-time high. A descending broadening wedge pattern has formed, which is one of the most powerful bullish reversal patterns.
The bullish pattern is in now activated, following the recent move the $405.00 level.. Watch out for a recovery back towards $437.00 while the breakout remains in play.
Source by ActivTrader.
Copper Medium-term Technical Analysis
Looking at the daily and weekly time frame, the larger picture for copper prices still shows an inverted head and shoulders pattern, which is reamins activated while the price trades above the $400.00 benchmark level.
According to the overall size of the bullish reversal pattern, copper prices could rise towards the $600.00 level, making it critical that bulls hold the price above neckline support, around the $400.00 level.
Source by ActivTrader.
