Copper has spent the past month compressing following the failed breakout above $6.73 a pound. Lower highs have emerged, but higher lows continue to print, leaving price action looking a lot less directional than it did earlier in the quarter.
The 50-day moving average has been an important support level since April, repeatedly rejecting bearish probes. With copper now trading below the level and on track for its first close beneath it since the April breakout, it's another sign that the bullish trend may be vulnerable to a larger pullback.
RSI(14) has been setting lower highs since early June while MACD has crossed below its signal line and is threatening to move into negative territory. Together, they suggest upside momentum has faded and downside risks may be starting to build.
If copper were to close beneath the 50-day moving average, one setup to consider would be initiating shorts below the level with a tight stop above. The bearish case would be strengthened further if the market were to subsequently retest the 50DMA and fail, potentially opening the door for a move towards $6.20 a pound initially.
Should $6.20 give way, it would be a more significant development, bringing the 100-day moving average and $6.04 a pound into play. The latter acted as both support and resistance earlier this year.
However, given the recent history at the 50-day moving average, if copper were to reverse back above the level and close there, it would create a potential long setup. Positions could be initiated with a tight stop beneath the 50DMA, targeting $6.50 and $6.60 a pound, with the latter capping gains on several occasions earlier this month. Given the strong advance that preceded the recent consolidation, a topside break would also be consistent with the broader bullish trend remaining intact.
Good luck!
DS
The 50-day moving average has been an important support level since April, repeatedly rejecting bearish probes. With copper now trading below the level and on track for its first close beneath it since the April breakout, it's another sign that the bullish trend may be vulnerable to a larger pullback.
RSI(14) has been setting lower highs since early June while MACD has crossed below its signal line and is threatening to move into negative territory. Together, they suggest upside momentum has faded and downside risks may be starting to build.
If copper were to close beneath the 50-day moving average, one setup to consider would be initiating shorts below the level with a tight stop above. The bearish case would be strengthened further if the market were to subsequently retest the 50DMA and fail, potentially opening the door for a move towards $6.20 a pound initially.
Should $6.20 give way, it would be a more significant development, bringing the 100-day moving average and $6.04 a pound into play. The latter acted as both support and resistance earlier this year.
However, given the recent history at the 50-day moving average, if copper were to reverse back above the level and close there, it would create a potential long setup. Positions could be initiated with a tight stop beneath the 50DMA, targeting $6.50 and $6.60 a pound, with the latter capping gains on several occasions earlier this month. Given the strong advance that preceded the recent consolidation, a topside break would also be consistent with the broader bullish trend remaining intact.
Good luck!
DS
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The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.