Charting Copper: Overhead Resistance Ahead

Investors often look to Copper as a leading or at least coincident indicator for the economy. 

The thinking goes that if companies are growing and expanding, they will need copper in new buildings or endeavors.  The same is true with an expanding housing market.  Copper also is an industrial metal that tends to get more expensive during economic expansions, and cheaper during economic declines.

With that in mind, let's take a quick look at the chart of Copper, starting with the broader weekly trend and then moving specifically to the daily chart.

First, the larger weekly structure.

The main level that should jump off the chart at you is the $360 to $380 region - with $360 being the most immediate overhead resistance level.  It's the 2010 price high.

A break above $360 would be a very bullish for the broader economy and would suggest that fears of a double dip recession might be off the table - at least according to investors. 

Above $360 is the important price level of $380 - sellers rejected price here three times in 2007, and price formed a ‘triple top' bearish price pattern just above $380 at $400.

Otherwise, there are plenty of potential lower support zones - from trendlines and moving averages - under price.

Now, let's drop our perspective to the immediate daily chart.

I highlighted the prior 2010 high at the $360 level - technically $365 - which could come into play in the next few weeks.

Before then, price must overcome the short-term bearish chart developments that have occurred recently.

These include the two bearish reversal candles with upper shadows - specifically a doji and spinning top/shooting star at the $350 level.

Beyond the candles, we have price at the upper Bollinger Band - that's bearish.

And finally, we have a negative momentum divergence, as shown by the 3/10 Oscillator.  Negative divergences are like caution lights that warn buyers to be careful.

To the credit of the bulls, price did rally very sharply off the confluence support zone of $320 as labeled.  The $320 low will be the key to the bull or bear bias.

It would be a very bearish development for price to fall back under $320 any time soon.  Barring that, we could certainly see a retest of the $360 level at the prior overhead price resistance.

Keep these levels in mind in the weeks ahead.

Corey Rosenbloom, CMT
http://blog.afraidtotrade.com