The extended bullish run for copper has most certainly come to an end for the time being, and if the Doctor copper moniker is to hold sway, it is not a good omen for stocks in the long term if this is the case but in the short term, it is all about levels and flows on the daily chart. This reversal in sentiment from bullish to bearish was first signaled on the 10th May with the extreme candle at the top of the chart on ultra-high volume which has seen the price fall from $4.87 lbs to last week’s close at $4.32 lbs with the commodity trading lower in early trading as the new week gets underway at $4.26.
As we can see from the chart, the key level to the upside is at $4.34 lbs and is denoted with the red dashed line of the accumulation and distribution indicator. It is a level that has been tested repeatedly across 18 sessions (so far) resulting in copper congesting in a tight range as it attempts to break through this resistance. Indeed, one highly significant sign of weakness was the candle and volume of the 6th July with the deep wicker to the upper body and on very high volume. Note also the price action of Thursday and Friday last week. Here we have a market that is attempting to rally, but spreads have narrowed on declining volume, which is not a signal of strength, a fact confirmed this morning.
To the downside, the key level as a potential platform of support is the red dashed line at $4.15 lbs again from the accumulation and distribution indicator which delivers these levels automatically. The indicator also gives us a clear visual indication of their strength as the line increases in thickness the more times it is tested.
So, in summary, it is a weak technical picture for copper and should the floor of $4.15 lbs be breached then we may see a return to the $4.0 lbs region. Moreover, given there is also a low volume node on the VPOC histogram at $4.12 it is an area where we can expect a fast fall in price.
By Anna Coulling
Charts from NinjaTrader and indicators from Quantum Trading
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