Copper: The Next Metal Set To Rise After Gold?
Commodities / Copper Feb 23, 2016 - 07:39 AM GMTBy: InvestingHaven
The copper market is getting excited! After a drop of +50% since it peaked in 2011, copper has basically gone only one way, i.e. down (just not in a straight line).
Now, copper is showing a similar setup as gold two months ago, right before gold rose sharply higher. Copper’s chart setup makes it very interesting, because sentiment is so negative nowadays: economic growth is slowing (driven by China), the interest rate hike was followed by talks about coming negative interest rates, companies are reporting rather poor earnings, manufacturing data are not very encouraging, … The list is endless, so everyone and his uncle is convinced that copper can only go one direction, i.e. down. That’s exactly the moment when magic happens in markets, as prices tend to move in the opposite direction, but that’s only a benefit for the sharpest investors as 99% has given up already.
The copper market, however, given all negativity in terms of sentiment, seems to be putting in a very significant bottom pattern, right in front of our eyes. Let’s revise the charts.
This chart comes from the video (embedded below), in which a couple of things stand out:
- The left bottom chart shows that point C, a lower low, did not have much follow through, so there is sufficient buying at that price level which confirms the scenario of a bottom.
- Point E seems to be holding higher than C.
- The grey moving average on the larger chart is the 60 day moving average, which is more important than the widely followed 50 DMA, and it shows signs of flattening, a very bullish signal, certainly if it will transition into a rising pattern.
Rob Tovell’s first target for spot copper is $2.20. There is not a clear buy signal yet, so a little bit of patience is required.
Watch the video for more details on the price of copper.
As spot copper seems to be bottoming, the largest copper miner is setting up for an even more interesting move. Freeport-McMoRan (symbol FCX) had a fantastic week, as its share price rose strongly above its important 60 day moving average (see the yellow line in below video). FCX is seemingly in the process of flattening out its 60 DMA, transitioning from a downtrend. Its 10 DMA (blue line in below video) has already transitioned to an uptrend, and is about to cross over its 60 DMA
The chart of FCX (below video) shows how its September support became resistance last week, i.e. $7.80.
What to expect from FCX in the weeks and months ahead? FCX is likely to come back down to its 60 DMA which comes in right above $6, where it will most likely bounce and continue its move higher, reversing its 60 DMA into an uptrend. The $6 area seems an excellent entry point, also given the setup of spot copper.
FCX looks quite bullish at the moment.
Analyst Team
The team has +15 years of experience in global markets. Their methodology is unique and effective, yet easy to understand; it is based on chart analysis combined with intermarket / fundamental / sentiment analysis. The work of the team appeared on major financial outlets like FinancialSense, SeekingAlpha, MarketWatch, ...
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