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Copper's Recent Ascent Warrants Attention
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Copper and other recent metals have been especially hot over the last few weeks, with copper prices moving roughly 25% higher since early February - that's a big move in a month for a commodity!
Is the move overdone? How can you play copper without trading futures? Let's take a quick look at the daily chart of the popular Copper ETN - (NYSE: JJC).
The ETN JJC is the UBS iPath Copper fund, which attempts to mirror the Dow Jones/AIG Total Copper Sub-Index Returns. Other than the DBB (which is the PowerShares Multi-Metal Trust), JJC is one of the best ways for investors or traders to play copper without using futures contracts. It's not as liquid as the major ETFs, but it will suffice for most investors.
That being said, we see - using simple technical charting - that the fund has some hurdles to overcome if price is to continue rising.
That's because we're seeing a shooting star/doji candle (often associated with reversals) candle forming at the upper Bollinger Band at the $47.00 per share level (roughly the $345 level in copper prices themselves).
Beyond the potential reversal candle at the upper Bollinger Band, we're seeing a negative momentum divergence form in the 3/10 MACD Momentum Oscillator - that's a non-confirmation of the recent price break above the $46.00 level.
We also have a pure price resistance level coming from the recent recovery high at $48.00 per share - so even if price did rally from here, it would have to challenge that overhead resistance level.
Odds seem to favor at least a retracement swing from here, though any sudden break to new highs above $48.00 would ring the bullish "all-clear!" sign.
Until then, we could see a downward swing to test the $44.00 daily moving average level... and if sellers push under $44.00, then we would expect a deeper reversal, making the $44.00 level the line in the sand between "just a simple pullback" and "a reversal to test lower prices."
Corey Rosenbloom, CMT
