Copper Hangs Precariously at Edge of Cliff

Sep 28, 2009: 12:56 PM CST

Copper Prices, which can be early indicators of economic strength or weakness, are hanging as close to the edge of a cliff as possible and we need to watch the outcome of the current structure for clues ahead.  Let’s see it.

This is one of those “Make or Break” moments in a price chart.

Price has been in a steady and comfortable uptrend since the early 2009 lows.  I say “steady” but in reality, copper prices have more than doubled in the last eight months which is quite impressive.

However, price has formed a type of “Rounded Reversal” or “arc” pattern at the recent highs and has formed perhaps the most interesting negative momentum divergence I ever remember seeing.  That alone is worth studying.

The Bollinger Bands have contracted, which hints that a price expansion move is favored in one direction or the other (in other words, volatility has contracted over the last month to ‘squeeze’ the Bollinger Bands around price).

Bulls need to hold the $270 index level, which reflects the rising 50 day EMA along with the lower Bollinger Band.  If bulls lose ground here – if sellers push prices lower than $270 – we could have a price expansion move to the downside occur which would drop price back to test support at the $220 level.

Bulls look to be holding support for the time being, but continue to watch the $270 level as the “line in the sand” (or more appropriately, the “Line at the Edge of the Cliff”) for the pathway of price ahead.

Corey Rosenbloom, CMT
Afraid to Trade.com

Follow Corey on Twitter:  http://twitter.com/afraidtotrade

4 Comments

4 Responses to “Copper Hangs Precariously at Edge of Cliff”

  1. vasuban20 Says:

    HI Cory :
    I want to understand if there is any inter dependence between copper prices and normal stock market . Lately I've seen that copper market is always leading the stock prices . Correct me if I am wrong

  2. Corey Rosenbloom, CMT Says:

    Hi Vasuban,

    I wouldn't say the correlation is 100%, or that copper always leads, but it certainly has a very high correlation, in that any economic recovery is going to need copper to build new buildings, do pipework, etc. It's therefore a good idea to watch copper and other industrial metals for clues on how the economy is faring.

    Thus, copper does have a slightly leading effect… or indication… of the stock market which tries to anticipate changes in the recovery.

  3. Trading News Center Says:

    Copper Hangs Precariously at Edge of Cliff…

    Copper Prices, which can be early indicators of economic strength or weakness, are hanging as close to the edge of a cliff as possible and we need to watch the outcome of the current structure for…

  4. Corey Rosenbloom, CMT Says:

    Hi Vasuban,

    I wouldn't say the correlation is 100%, or that copper always leads, but it certainly has a very high correlation, in that any economic recovery is going to need copper to build new buildings, do pipework, etc. It's therefore a good idea to watch copper and other industrial metals for clues on how the economy is faring.

    Thus, copper does have a slightly leading effect… or indication… of the stock market which tries to anticipate changes in the recovery.