Many in the trading world refer to the Copper commodity as Dr. Copper for its above average correlation in predicting global economic turning points.
This past week I saw a nice bounce and some volatile action in copper prices which lead me to write this quick review. If you have read some of my other reviews you will know by now that the first thing I do is turn to the charts. In May of this year, copper saw a nice decline about 2 months ahead of our equity markets.
This week we are noticing a start of a rebound pattern in copper prices following a diamond signal we got last week. These diamond signals suggest a possible oversold/overbought pattern with a possibility of turn around. This early reversal pattern coincides with our stock market strong bounce following Labor Day weekend, as well as the interventions made by the Bank of China (PBOC).
So far, at the time of writing ( 9-9-15), copper still has to prove something…that something would be a close above 247.70 as seen in the weekly chart below.
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My outlook on this one is that it is still just a bounce after a strong sell off. I do see a possibility of making an attempt back to 263, but in my opinion the trend is still down.
The options market in copper is not the most liquid, hence I would stay away from options on this one and rather use straight futures. You can find out copper futures specifications on our website. Heikin-Ashi weekly chart of copper for your review below. I am not a fan of selling at certain levels just because they appear on the chart, “considered to be” support or resistance etc., hence I will not just simply look to sell at 247.70 or 263…instead I would like to see that these levels are being confirmed by a trigger. That trigger can be found by using lower time frame, daily or even hourly. I would look for either a moving average cross over on the lower time frames against the resistance levels. Maybe even better, look at RSI or similar indicators suggesting overbought on the short-term and then starting to point down. This is when I look to enter short positions and depending on when these signals happen, I will look at nearby levels to determine my initial stop loss orders. Plan your trade, trade your plan and good trading to all of you!
Disclaimer – Trading Futures, Options on Futures, and retail off-exchange foreign currency transactions involves substantial risk of loss and is not suitable for all investors. Past performance is not indicative of future results. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge, and financial resources. You may lose all or more of your initial investment. Opinions, market data, and recommendations are subject to change at any time.
**Note about stops: THE PLACEMENT OF CONTINGENT ORDERS BY YOU OR YOUR TRADING ADVISOR, SUCH AS A ‘‘STOP-LOSS’’ OR ‘‘STOP-LIMIT’’ ORDER, WILL NOT NECESSARILY LIMIT YOUR LOSSES TO THE INTENDED AMOUNTS, SINCE MARKET CONDITIONS MAY MAKE IT IMPOSSIBLE TO EXECUTE SUCH ORDERS.