Technicals | Apr 29 2010
By Rudi Filapek-Vandyck
Copper has surprised most marketwatchers by falling through technical support at US$7600/tonne this week, indicating there might be more to the noticeable retreat in global risk appetite, it might turn out the beginning of a return to a period of risk aversion.
One of the questions travelling around markets is now: how far has this correction to run yet before copper prices stop falling? Technical commodity analysts at Barclays Capital believe the copper price could well again fall below US$7000/t before this correction is over.
They base this view on the fact that technical indicators have now turned bearish for the metal, meaning any bounce in price should be seen as “counter-trend” with the market likely targeting technical support at US$7200/t, if not US$6950/t.
It has to be noted these analysts remain convinced copper remains in a longer term uptrend. It's just that for the shorter term the trend has now gone into reverse, in their view.
Few market watchers seem to disagree with this short-term view. However, not everyone agrees with the technical levels as cited by the Barclays analysts. At MFGlobal, for instance, the analysts are talking about the next level of support at US$7300/t.
MFGlobal reports that as copper has now fallen below its short-term trend channel, a return to US$7300/t seems but the logical thing to expect next.
Chartists at Basemetals.com have equally turned bearish on the metal, citing the fact that copper's consolidation below key resistance at US$8000/t has now turned into an outright sell-off as the main reason why more weakness should be expected.
Adding to the negative outlook is the fact that copper has now fallen below the 50 day moving average, another major negative from a short-term momentum perspective. Basemetals chartists are now advising investors should watch the strength of any price rebounds to judge the severity of this correction.
Last night, copper prices managed to eke out a tiny gain to close above US$7400/t.
Basemetals chartists see technical support at US$7350/t and at US$7255/t. They anticipate increased volatility in the sessions ahead.
