Weekly And Daily View Of Copper

By Corey Rosenbloom on April 8, 2009
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.
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.
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 - anxtraordinarily 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.