Technical Analysis – Copper futures turn bullish in short term; bearish outlook weakens
September 26, 2018 3:26 pm
Copper futures have recovered substantially from the 14-month low of 2.5485 set on August 15. But the positive momentum has eased after prices met resistance at the 38.2% Fibonacci retracement level of the downleg from 3.115 to 2.5485.
The upside drive ran out of steam as the stochastic oscillator entered overbought territory. The %K line has since crossed below the slower moving %D line, signalling further possible corrective moves in the near term. However, both the stochastics and the RSI remain firmly in positive territory, supporting the view of a continuation of the bullish picture in the short term.
In order for copper futures to extend recent gains, they would need to overcome immediate resistance at the 38.2% Fibonacci at the 2.84 level. A break above this hurdle would bring the 50% Fibonacci at 2.93 into range. Moving higher, resistance would come from the 200-day moving average near the psychological 3.00 handle, which is just below the 61.8% Fibonacci level. A break above this resistance area would shift the bearish medium-term outlook to a bullish one.
However, failure to break higher would bring the bears back into the market, leading to a downside reversal and putting the focus on the 23.6% Fibonacci at 2.73 for support. A drop below this support would accelerate the declines, risking a test of the 14-month low of 2.5485, which if breached, would signal a resumption of the medium-term downtrend.
Copper futures have recovered substantially from the 14-month low of 2.5485 set on August 15. But the positive momentum has eased after prices met resistance at the 38.2% Fibonacci retracement level of the downleg from 3.115 to 2.5485.
The upside drive ran out of steam as the stochastic oscillator entered overbought territory. The %K line has since crossed below the slower moving %D line, signalling further possible corrective moves in the near term. However, both the stochastics and the RSI remain firmly in positive territory, supporting the view of a continuation of the bullish picture in the short term.
In order for copper futures to extend recent gains, they would need to overcome immediate resistance at the 38.2% Fibonacci at the 2.84 level. A break above this hurdle would bring the 50% Fibonacci at 2.93 into range. Moving higher, resistance would come from the 200-day moving average near the psychological 3.00 handle, which is just below the 61.8% Fibonacci level. A break above this resistance area would shift the bearish medium-term outlook to a bullish one.
However, failure to break higher would bring the bears back into the market, leading to a downside reversal and putting the focus on the 23.6% Fibonacci at 2.73 for support. A drop below this support would accelerate the declines, risking a test of the 14-month low of 2.5485, which if breached, would signal a resumption of the medium-term downtrend.
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