Copper prices got a boost from the surprise of victory of Donald Trump in the US Presidential elections last month.
The copper futures contract traded on the Comex in New York has surged over 9 per cent since the US election day from $2.38 per pound to the current levels of $2.6.
On the domestic front, the copper futures contract traded on the Multi Commodity Exchange (MCX) has skyrocketed over 12 per cent from ₹348.8 a kg to ₹392 over the same period.
However, the rally in the metal price seem to be losing momentum in the last few weeks. The MCX copper contract has come off from its high of ₹414.8 recorded on December 2. There is a possibility of a fall in the prices before the uptrend resumes.
Short-term outlook: The price action on the daily chart reflects the formation of a double top reversal pattern. The 21-day moving average support is near current levels at ₹390. A strong break and a decisive daily close below this support may confirm this reversal pattern. Such a break can drag the contract lower to ₹383 – the 200-week moving average support immediately.
If the contract manages to reverse higher from ₹383, a bounce-back move to ₹400 and ₹410 is possible once again. But a strong fall below ₹383 will increase the downside pressure and drag it to ₹375 or even ₹367 thereafter.
The MCX contract will need a strong break above ₹410 to gain fresh bullish momentum. The next target is ₹420. Further break above ₹420 will increase the likelihood of the rally extending to ₹440 and ₹450 thereafter.
On the global front, the Comex copper contract was range bound between $2.60 and $2.70 over the last few weeks. The contract is on the verge of breaking this range below $2.6. Such a break may bring in fresh selling pressure in the contract and drag it to $2.50 or even $2.45 thereafter.
A strong break above $2.70 is needed for the contract to gain fresh bullish momentum. Such a break will pave way for a fresh rally to $2.75 or $2.8.