Weekly and Daily View of Copper

Apr 7, 2009: 11:27 AM CST

A couple of readers have asked me to take a look at Copper prices, which have been tracing out a similar pattern to Crude Oil.  Let’s take a quick look at the Weekly and Daily charts of Copper, which includes as massive Rounded Reversal and recent Cradle Trade.

Copper Weekly:

Just like many other commodities, Copper reached a high mid-summer 2008 and then suffered a massive, unforgiving decline down into new lows into the beginning of 2009.  We’re seeing a similar arcing pattern to the upside, though it seems stronger in Copper than in Crude Oil which is coming off its own “Rounded Reversal.”  Crude Oil is currently challenging (and apparently failing) at its 20-week EMA while Copper made little work of breaking above it into the “Open Air” space between the 20 and 50 EMAs.

We see a positive momentum divergence coming off the October price lows that continued until the actual lows in December (notice the doji candle that marked the exact low so far).  Price is now in “Open Air,” meaning there’s not many reference points between $220 and $180.  Notice the confluence with the 38.2% Fibonacci retracement and the 50 EMA at the $220/$230 level.  Bulls will find that level difficult to overcome if price can even rally that far.

Copper Daily:

Dropping down to the Daily Chart, we see a closer view inside that lengthy positive momentum divergence that began in October and continued until December (again, notice the dojis on the daily chart at the lows).  Price found key resistance (which also was good areas to place short-sell trades) at the 20 day EMA (a good place to trail a stop) through the decline.

Finally, as 2009 began, Copper broke that 20 EMA which set-up a “Magnet Trade” to test the 50 EMA.  Notice the New Momentum High that set-up on this break. It did so and became ‘wedged’ or trapped between these key averages in a consolidation (Value Area, rectangle) until price surged out forming a new high at $170 and officially confirming the daily trend to Up, and also setting up the “Cradle Trade” which is the EMA crossover (“Golden Cross”).

The cradle held (notice the quick doji that formed into the Cradle – an extraordinarily high probability buy signal – which held.

If you look closely, we see a slight negative momentum divergence setting up into the higher prices as bulls challenge the $200 level.  This level could hold as ’round-number’ resistance, particularly if we get a down-move off this level.  It would set-up an “Exhaustion Gap” which is very bearish for price, particularly as it gaps into possible resistance on a negative divergence.

Continue to watch Copper Prices closely – if we’re going to have any sort of economic or stock market recovery, it would be perhaps foreshadowed and accompanied by continued strength in Copper.

Corey Rosenbloom
Afraid to Trade.com

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9 Comments

9 Responses to “Weekly and Daily View of Copper”

  1. Dyugle Says:

    Hi Cory
    Good work on copper and there is usually a fairly good correlation between the dry baltic index and copper so I expect copper will start to follow the index down fairly soon.
    Thanks again.

  2. Corey Rosenbloom Says:

    Dyugle,

    Exactly – there was a lot of chatter about the BDI rising but now it’s turned back and is rolling over. Copper/Crude could do the same thing as well.

  3. Abe Says:

    Hi Corey (a ‘tecnichal’ question) – which software allows you to draw the curved lines used to show, for instance, a “rounded reversal”?

    thanks

  4. Neil Says:

    Corey …. Gosh, that was quick … I mean I had requested for copper and in matter of hours you did this post, mate you surely are rolling. Awesome analyasis as always from you. Simply love the way you keep it so simple and point to point, that it’s so easy to percieve. Just one more thing, could you please explain “magnet trade”. This term is new to me. Thanks again.

    Cheers

  5. Corey Rosenbloom Says:

    Abe,

    There’s a few screencap programs but I use Snag-It by Techsmith. I like the shadow effects it does.

  6. Corey Rosenbloom Says:

    Neil,

    haha no problem. Someone else had emailed me to look at copper this weekend and I meant to get around to it. When you asked, I took it as a reason not to wait any longer.

    Hmm.

    Magnet trade is also an “Open Air” trade where there’s nothing to stop the price from moving from one point to another. It’s like slicing through open air.

    Like here, when price finally broke above the 20 EMA, the next level of resistance was the 50 EMA. Thus, I say the 50 EMA sets up a “magnet” that “pulls” price up to it. You can do a “Magnet Trade” by finding a clean break of the 20 EMA and then scalping a target at the 50 EMA. Stop beneath the 20. It’s good for a quick scalp only.

  7. Tan Haw Swee Says:

    I really appreciate your analysis on copper price movements but I dun get the keyword on whether the price is going up or down to be exact in the near term say within this coming two to three weeks. the reason I ask is bcos I have some stock in hand to dispose and I wish to dispose it at a higher price as I have missed the earlier one just two days ago, Please advise, Thank you.

  8. Tan Haw Swee Says:

    Hi, Corey,

    Tell me where I can get the same chart you used for your analysis or could you forward to me one of those charts so that I can do my personal analysis on the copper future as I am very concern about the copper’s price movement as I hv some physical stock in hand and wishfully want to let go at higher price in the very near future. Thank you and please help me

  9. rashmi Says:

    please advice me trend is upward or downward i bought copper at 236 so please advice me what should i do