Technicals | Oct 31 2016
Bottom Line 28/10/16
Daily Trend: Neutral
Weekly Trend: Down
Monthly Trend: Down
Support Levels: 206 / 202 / 195
Resistance Levels: 222 / 229 / 234 / 240 – 250
Technical Discussion
[Note: All prices USc/lb]
Copper prices are at weekly highs as reports indicating that China is still willing to add further stimulus to its economy, fueled some immediate demand. Two sessions ago when price spiked, it was also aided by the U.S Dollar Index rejecting off its recent 99.06 high point, which is also very near to our short term wave equality target on the currency. With major resistance also just above on the Greenback price is now in a clear cut inflection zone. So if weakness suddenly becomes a theme, then this is also likely to keep metal prices nicely on the bid. As for China though, even though supply is still an issue for Copper, it accounts for nearly half of all global copper demand. So if fiscal stimulus is still on the agenda, this could easily keep prices supported at these lower levels for the time being.
Reasons to remain bearish :
→ longer term bearish momentum continues to sustain
→ 195.00 support remains in the spotlight
→ above 250.00 puts a more positive spin on things
→ surpluses reverting to deficits later in 2016 now being questioned
Price being supported at lower levels and price actually indicating it is ready to head on higher, are two completely different matters. Obviously as traders we want to become involved in trends, not sideways patterns which is what we have here at the moment. Price has been coiling within what we have defined as a symmetrical triangle bottoming out process, and as it has been in this sideways mode all year, we are continuing to look for signs of a breakout higher rather than lower. Two sessions ago, we may have witnessed the first early signal of this possibly building towards happening as levels continue to head closer and closer towards the apex of the pattern, which is where major directional decisions are made. The volume on this day was also well above average so clearly buyers were getting involved.
Price is now nudging the 200 day moving average which has held price below it for a many number of years. So if we can break higher from here off a well over sold position on our divergence indicator, then this may finally be the breakout we've been looking for after all this time. Basically though we need the price triggers to confirm. The first one comes in at 229, then 234. If these mini milestones can be achieved via moves that stick, then price action will start looking towards the 240 – 250 resistance where any move above puts things back in bullish mode. Very early days only so we are certainly not going to get ahead of ourselves just yet.
Trading Strategy
'The thing we like about triangle patterns is that they generally do offer up nice low risk / high reward setups, so this is something we would certainly like to be a part of from a trading perspective.' The pattern doesn't breakout officially until 229 can be tagged yet for aggressive traders we are going to offer up a recommendation right here to trade long at 215 with stops below 206. We are running off the backing of our discussion in our technical section tonight, and on the basis that the recommendation is about as low risk as you can get basis our entry position and how tightly we have our stop. So if we do get stopped out, there will be limited damage inflicted. If price does move forward from here, we will look to offer up another opportunity for more conservative traders over the coming weeks.
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