Copper Comes into Confluence Resistance

Apr 16, 2009: 8:58 PM CST

Talk about stopping a market dead in its tracks – Copper prices have reached a target area of confluence resistance that offers a favorable risk/reward ratio if the resistance holds.  Let’s these forms of resistance and what they might mean.

Copper Prices Daily:

There’s more to see on the Daily chart at the moment.  We have the following sources of possible overhead resistance:

38.2% Fibonacci Retracement of the July highs to December lows at $232.47 (inverse on chart)
50.0% Fibonacci Retracement of the September highs to the December lows at $227.44
200 day Simple Moving Average at $226.79
50 week Exponential Moving Average at $226.27

Note the Fibonacci confluence (I sometimes draw my Fibonacci grids inverse, starting with a low and ‘dragging’ to key swing highs) at the $230 level.

We had a powerful move off the “Rounded Reversal” lows at $125, as copper (index) almost doubled in price!  This is not to say the up-move is over, but only that there is a significant confluence of ‘hurdles’ from Fibonacci levels and multiple timeframe moving averages that will be very difficult for bulls to overcome in the short-term.

Copper Prices Weekly:

A quick glance at the weekly chart shows price rallying into the falling 50 EMA.  The weekly chart also gives us a deeper look at the price structure (and how far price has fallen) from its $400 peak.

Mainly, I’m teaching you how to approach support and resistance using non-correlated methods.  There’s no guarantee any of these expected resistance levels will hold, but if they do, it offers a superior reward to risk ratio with a tight stop being placed beyond the confluence zones and a downside target (depending on your strategy) which will be larger than your stop.

Keep in mind that we just made a new price (relative) and momentum high, so this suggests higher prices are yet to come, but not before we get some sort of retracement or pullback.

Copper prices have been known to be somewhat of a barometer for economic activity, and seeing this strength in Copper prices can be interpreted as being bullish for the overall economy… but that’s a whole other discussion.

Keep watching copper prices closely to see if these confluence resistance levels are enough to thwart raging copper bulls for the moment.

Corey Rosenbloom
Afraid to Trade.com

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2 Comments

2 Responses to “Copper Comes into Confluence Resistance”

  1. Steve Geringer Says:

    Hi Corey,

    Interesting that you point out what is happening in Copper. Just yesterday I read where China is stockpiling the base metals to diversify out of the US Dollar and ensure future supplies for their industrial needs.

    Check this article:

    http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/5160120/A-Copper-Standard-for-the-worlds-currency-system.html

    Steve

  2. Corey Rosenbloom Says:

    I caught that on Bloomberg too. Also noted how some economists thought China had acquired as much as they’re going to for the time-being, and that their economy would continue to be weak.

    Thanks for the link!