Technicals | Mar 23 2011
– From a technical view the bullish trend is likely to resume for commodities
– Analysts at Barclays Capital expect new highs for RJ CRB Index
– Copper chart also suggests potential new highs
By Chris Shaw
The initial reaction to the Japanese earthquake and tsunami was for weaker commodity prices, technical analysts at Barclays Capital noting the RJ CRB Index corrected to anticipated support around 340.
A rising trend line that extends back seven months as well as cloud support should see a resumption of the greater bull trend in the view of the analysts. The previous two recoveries followed corrective downturns of around 7.5% and coincided with bearish momentum extremes.
This leads the analysts to suggest a rally will see the index break above resistance in the 363.50 area and make new highs. The analysts are targeting 370 initially and then the 406/418 area, the latter target implying 24% appreciation off recent lows.
With respect to the LME base metals index, the technical analysts at Barclays similarly assume the greater uptrend within an existing two-year bull channel will resume. The expectation is for a clear break above the May 2007 peak at 4,500, which the analysts suggest would confirm a rally extension towards an eventual target in the 4,940 area.
Within the base metals scope, the analysts are in particular bullish on copper, seeing the current consolidation phase as a healthy pause within an ongoing bull trend. Buying interest is expected near 9,200, with any break above falling trend line resistance around 9,825 to trigger a bullish flag pattern.
This is seen as technical confirmation there remains potential for new highs, with prices expected to move through the 10,190 all-time peak. An initial target is 10,467, while the analysts have an eventual target for the flag pattern of [US$]11,215/tonne.
Technical limitations
If you are reading this story through a third party distribution channel and you cannot see charts included, we apologise, but technical limitations are to blame.
