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Copper – Overextended and rolls over

Market Analysis

Copper, Daily               

I last posted about Copper at the beginning of last month (October 6) as a SHORT trade with the long term down trend that has been in-tact for over 6 years. The trade hit both T1 and T2 from an entry at 2.1555 to 2.1170 for a 385 pip move. The price continued to decline and found a base towards the end of the month at 2.0775 the rally in the last six weeks has been very significant and pronounced.  I now expect a retrace and pull back before a possible further move north during the first half of 2017.

The October low was followed by two November highs (a spike following the US election (November 10) and then again on Monday (November 28) with a Shooting Star candle. Yesterday’s down candle held above the 23.6 Fibonacci level and this could prove resistance to a move lower. A short position was taken at 2.5930 with a Target 1 around the 20 DMA, the 38.2 Fibonacci level and the 14 DATR at 2.4830. Target 2 is down at the 50.0 Fibonacci level at 2.4045.  The 14 Period RSI remains overbought at 70 and the MACD is suggesting strength but is also in an overbought condition. The Parabolic SAR remains positive.

The significant move in the Copper price this month could signal the end of the 6 year slump in the price of the commodity. Only time will tell if this feeds through into 2017 and the promised infrastructure spending in the USA and capital controls in China continue to feed a new commodity rally.

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Stuart Cowell

Market Analyst

HotForex

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