Daily and Weekly Trend Structure Update for Copper

Mar 30, 2011: 9:17 AM CST

I’ve heard a lot of chatter about Copper prices and a potential reversal lately, so let’s take a quick look at simple trend structure and levels to watch on both the important weekly and daily chart frames.

First, the Weekly Chart gives the bigger perspective:

First of all, when quantifying trend on the weekly chart, let’s look at the two main (simple) metrics:

1.  Pure Price: Price continues to make a series of intermediate term higher highs and higher lows

2.  Moving Averages: The weekly EMA structure is in the most bullish orientation possible

With that in mind, the larger structure is clearly to the upside and will thus be classified officially as such UNLESS price moves under the $400 level anytime soon.

Doing so would break both of these facts – slicing to a new swing low and locking in a new lower high and then breaking under the rising 50 week EMA.

So far, like the stock market at this moment, the weekly chart just shows your standard retracement to EMA support on the weekly level.

Copper is highly correlated with the stock market as the metal is tied into economic expectations of expansion or contraction, like stocks.  In that way, copper becomes a decent barometer for the economy (as it’s used in basic materials/construction which increases in good times and decreases in bad times).

Anyway, do pay attention to the weekly negative momentum divergence as a warning sign and non-confirmation of the otherwise objective bullish uptrend in place.

Now we switch-down to the Daily Chart for a better view:

Always remember that when you zoom-in to a lower timeframe, you view more data and thus view more ‘swings’ to classify that get missed on the weekly frame.

That’s why trend reversals are identified/confirmed EARLIER on the lower timeframe.

Unfortunately, not all trend reversals on the lower frames morph into full trend reversals on the higher frame (think of how many ‘trend reversals’ occur on the 1-min chart in a week!).

Using the same Price and EMA trend identification methods, we have indeed devolved into a very early (subject to a ‘whipsaw’ or false trigger) downtrend on the daily chart.

How?

Price has formed a series of recent lower highs and lower price lows which would be re-confirmed/re-triggered on a breakdown under $410 soon.

Also, the 20 and 50 EMAs just narrowly crossed bearishly in March, though this is still in the “whipsaw potential” territory.

There’s a basic nebulous period when a trend reverses and Copper is in it right now.  Further downside will confirm the reversal and trigger more sale signals, but if buyers can fight the turn, then the weekly uptrend will kick-back in and price will continue rising.

It just means we need to watch the $450 level for a bullish breakout (which would throw cold water on the trend reversal thesis) or $410 and particularly $400 for a re-confirmation of the bearish trend reversal thesis.

To increase the odds significantly, you would wait to declare a full multi-timeframe trend reversal in copper until price broke under the $375 level, which would crack price under the rising 200 day SMA (a level that some investors use to filter up vs down trends) and 50 week EMA.

Structure is evolving and it means we all need to be watching these levels very closely for triggers if the weekly uptrend will continue to move prices higher… or if the daily chart is sending an early reversal signal.

Corey Rosenbloom, CMT
Afraid to Trade.com

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3 Comments

3 Responses to “Daily and Weekly Trend Structure Update for Copper”

  1. Grand Supercycle Says:

    COPPER has ignored the recent equity bounce. Daily and weekly
    charts are not bullish ~ 31 March

    Also check out this chart http://wp.me/pTrb8-1kx

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