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We take a close look at the key base metal copper in this week’s commodity dissector. The spot price of copper traded on London Metal Exchange (LME) is considered for this technical analysis.
The spot price is quoted in USD/MT (metric tonne). LME copper spot finished the week at $7595.75.
Long-term view
Ever since bottoming out at around $3,000 in December 2008, copper has been in a long-term uptrend.
However, after encountering a key psychological resistance at around $10,000 in February 2011, copper began to decline. It has been on an intermediate-term downtrend since then.
Long-term trend stays up as long as copper trades above its key long-term support band between $6,000 and $6,250.
A strong decline below this support band can drag the commodity down to $5,000 and $5,250 range in the long-term. On the upside, a decisive rally above $8,800 will reinforce bullish momentum and accelerate the commodity higher to $9,300 and then to $10,000 in the same time frame.
Medium-term view
Copper met with key resistance in the range between $8,500 and $8,660 in February 2012 and started to decline.
The commodity has been on a medium-term sideways consolidation phase between $7,250 and $8,660 since last November.
Within this band, copper has key support at $7,500 and resistance at $8,000.
A downward break of $7,250 will drag the commodity down to $6,500 and to $6,000 in the months ahead.
Strong rally above $8,660 and the next resistance at $8,800 will strengthen the commodity and take it higher to $9,300 levels.
Short-term trend has been down for copper from its peak of $8,400 in September this year.
Then in late October, the commodity conclusively breached its key support as well as 200-day moving average at $8,000.
However, it is hovering above the important support level at $7,500. Its daily relative strength index is displaying positive divergence implying a potential short-term trend reversal.
An upward reversal will take the commodity higher to $8,000 in the short-term and then to $8,400 levels.
Breakthrough of support level $7,500 will reinforce bearish momentum and pull the commodity down to $7,250 and $7,000 in the ensuing weeks.
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