Commodities are Taking a Beating

Commodities have been taking it on the chin lately, with corn, wheat, silver, copper, and gold are all seeing weakness. Back in January I discussed the bearish setup taking place in silver with momentum breaking down. The next level of support I’m seeing would be the 2012 low from last June near $26.50. And even there I would be cautious.

I’ve written about copper a couple of times over the last year, most recently on Feb. 27th when Dr. Copper was hitting a trend line. I discussed that when a security or commodity repeatedly tests a trend line the likelihood of it breaking increases, and that the bears could take us to the previous low of $3.40. Well we broke the trend line and are already below $3.40 as of this morning. In early Feb. I wrote about Dr. Copper’s Bearish Pattern which was a rising wedge with falling momentum.

Below is the chart I showed in February. We can see the breakdown of the reversal pattern which also coincided with a break below the 50-day moving average. The diverging momentum ended up giving the correct signal for weakness which has taken copper down nearly 9.5%.

With this drop we can begin looking for a possible level of support. The obvious area would be around $3.30 which is the low found in 2012. Momentum (based on the RSI indicator) still is showing us that copper is weak, staying under 40 and repeatedly entering the oversold territory. We might see some type of consolidation near $3.30 like we saw in June and July of last year but we won’t know until we get there.

copper China has a big impact on the copper market and any poor economic figures we get from there will likely continue to have a negative effect on the Dr. So while I let the charts lead the way and tell the story, I don’t put blinders on to data sets that have an impact on price. In the coming weeks (if not sooner) we’ll see how price reacts to the prior low and if the bulls are able to get to work.

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+.

Checking Back in With Copper

Back on Feb. 14th I wrote about the bearish setup taking place in copper. Since then we have seen copper fall a little over 7%.

This has taken us to a longer-term rising trend line going back to October ’11. The more times this trend line gets tested the weaker it likely becomes, so with the global markets recently taking a ‘risk off’ posture it might be just what copper bears need to finally break below and test the previous low of $3.40. Those hoping for lower copper prices must also contend with the 200-week moving average (not shown) which sits at $3.52.

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+.

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+.