Dr. Copper’s Bearish Pattern

I’ve been focusing on commodities the last few posts on the blog, largely due to the lack of anything interested taking place anywhere else. Today we stick to the theme and take a look at copper.

Dr. copper appears to have created a bearish charting pattern on a daily chart that’s called a rising wedge. We’ve had three tests of resistance and two (almost three) tests of support as shown by the blue dotted lines on the price panel of the chart below. While price has been advancing we can see that the RSI indicator has not been able to make new highs, creating a slight divergence. However, buyers have been able to keep momentum above 50 which tells us that upside momentum hasn’t completely vanished quite yet.

On the upside we have previous highs around $3.85 for price to contend with if we do see an upside breakout. This level also corresponds to the 50% retracement between the 2011 high and low (not shown). It’s hard to see but I’ve included the 50-day moving average which has helped act as support during this multi-month advance. Bears will need to break both the rising trend line and the moving average in order to see any type of substantial weakness. As I mentioned, this is typically a bearish pattern but that doesn’t mean bulls couldn’t pull it out and take us higher. I’ll be watching what momentum does on any type of breakout and see if volume confirms the next move.

Copper

Disclaimer: Do not construe anything written in this post or this blog in its entirety as a recommendation, research, or an offer to buy or sell any securities. Everything in this post is meant for educational and entertainment purposes only. I or my affiliates may hold positions in securities mentioned in the blog. Please see my Disclosure page for full disclaimer. Connect with Andrew on Google+.

About Andrew Thrasher

Andrew Thrasher, CMT is an Investment Analyst for an asset management firm in Central Indiana. He specializes and writes about technical analysis as well as macro economic developments.