Focusing on the Key Trading Level for Copper JJC

Jan 14, 2014: 11:19 AM CST

Copper has entered a key trading decision point – namely confluence resistance – and I wanted to highlight this area along with the objective trade planning levels at this inflection level.

Let’s start with a broader perspective of the current level and trend structure (JJC as an ETF proxy):

JJC Weekly Chart Trend Structure Downtrend Fibonacci moving Averages

For the JJC commodity ETF, we can see a persistent (primary) Downtrend in motion since the 2011 top (which was actually ahead of oil, gold, silver, and the peak of other commodity markets).

The main idea for short-term traders is that price is “compressed” between the falling 50 week EMA and (slightly) rising 20 week EMA at the $41.13 and $40.31 price levels respectively.

We’ll focus our attention on the $41.00 level which forms a confluence with the falling 50 week EMA, upper Bollinger Band, and shorter-term Fibonacci Retracement Levels.

Here’s a wider perspective of the Daily Chart structure (and Fibonacci) of @HG Copper Futures:

JJC Copper Fibonacci Confluence Trend Structure Bear Market Trading Decision Inflection Zone

For the actual commodity, our focal point is the $3.42 (roughly $3.41) level as shown by the 23.6% Retracement and price confluence.

We also note the negative momentum divergence into this key resistance area.

A logical downward inflection targets the $3.200 level (rising trendline) or lower while an “alternate thesis” upside breakout sets in motion a short-squeeze upward impulse that could quickly target the $3.70 level.

We can see the trading parameters clearer on a zoomed-in perspective of the Daily Chart:

JJC Copper @HG Futures Trend Structure Fibonacci Confluence Inflection Point Trading

I drew a Confluence Fibonacci Retracement Grid (short-term) which shows overlap just above the $3.40 level.

Not only is this a Fibonacci Level, it’s also a “polarity” price level which means this region has served both as prior support and resistance – it makes it a key reference point.

We can also see the negative momentum divergence clearer on the zoomed-in chart (note prior divergences and price reactions).

Short-term traders can play for additional downside action away from $3.400 (particularly on a trigger-break under $3.300).

On the other hand, a real-time breakout above the red Fibonacci Cluster above suggests that a breakout impulse could take price back above the $3.500 level.

Use these key inflection points and short-term targets for entries, management, and stop-loss planning relative to the $3.4100 level.

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Corey Rosenbloom, CMT
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