Sunday, July 22, 2018
COPPER Weekly and Daily Charts; Copper in Correction
Copper is a big story over the last few days due to the six-week collapse in the red metal. If the global economy was healthy, this should not be happening. Dr Copper is laying on a gurney in the emergency room. On the weekly chart, the RSI, MACD line and histogram remain weak and bleak wnating to see more lower lows in the weekly time frame. Money flow is also weak and bleak over the last month although positively diverged on the year.
Price has violated the lower band for four consecutive weeks and desperately needs at least a dead-cat bounce. Stochastics are oversold agreeable to a bounce in the weekly time frame as well as the money flow.
The dead-cat bounce is reflected in the daily chart with positive divergence across all indicators as price came down to print the matching low on Friday. The Tweezer Bottom, lower band violation, possie d and oversold conditions create the bounce. SCCO, COPX and FCX are potential copper plays and Keystone took out speculative longs in SCCO and FCX for the very near term. This is a dangerous trade and if price reverses quickly, Keystone will ditch the trades.
The daily chart indicates that the middle band at 2.86 is on the table so copper may feel some further love to begin the week. However, the weekly chart remains sick and on the weekly basis, copper will likely roll over again, after the bounce in the daily time frame, and head downward to print matching or lower lows. The weekly chart hints that a firm bottom in copper is likely 2 to 3 weeks out. The 200-week MA support is at 2.62 so price may need to show respect to this important moving average before it bounces in the weekly time frame.
On the daily chart, note the purple arrows in late May highlighting the tight standard deviation bands. You knew a huge move was on tap but the tight bands do not predict direction. It turned out to be up with a huge rally that had global traders and strategists proclaiming a booming economy, but then copper crashes from that 3.30-ish level silencing these cheerleaders. A drop of -10% off the high is at 2.97 which occurs in late June representing a correction in play. A -20% drop is 2.64 which represents a bear market and as mentioned the 200-week is at 2.62 and Friday's low was 2.68 a tiny hair from a bear market. Copper may want to bottom in early August in this 2.58-2.68 area.
Keystone is looking for a further pop in copper on the daily basis and will ditch the SCCO and FCX trades if they receive a few percent in profits since the weekly chart forecasts more trouble ahead. The trades will also be exited if copper turns quickly south without wanting to come up to tag that middle band at 2.86. Copper will likely bottom in the weekly time frame in early August but copper bulls should be happy for this week ahead. You must remain nimble in these tricky erratic markets. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here. Consult your financial advisor before making any investment decision.