A panic low in copper?
Chart patterns show the recent price decline is just a correction within a long-term uptrend.
- The trading range, lines a and b, looks like a continuation pattern that should be resolved to the upside with targets in the 790-810 area. This is about 26% above current levels
- There is initial resistance at 657-665 with stronger resistance in the 686 area
- A close above the 705 level would complete the continuation pattern
- Initial support now stands at 614 with major support in the 570 area, which corresponds to the highs from early 2010
- The major 38.2% support level is at 521.25
- The flag formation (lines a and b) is typical of a correction within an uptrend, and last week’s low at $50.59 held above the 50% Fibonacci retracement support at $49.30
- This support also corresponds to the trend line support (line b) and the November 2010 lows at $49
- The weekly on-balance volume (OBV) did confirm the early-2011 highs, but the heavy selling over the past few weeks has taken the OBV below support at line d
- There is initial resistance now at $54.30 and then in the $56.50 area
- A completion of the chart formation (lines a and b) has upside targets in the $65 area, which also corresponds to the 127.2% Fibonacci retracement targets
- FCX closed well of the lows last week at $45.40, leaving a long tail on the weekly candle chart. Similar action was seen at the March lows (see circles)
- The weekly uptrend, line f, was broken on last week’s drop, and the 38.2% support from the 2010 lows ($40.90) was almost reached
- The relative performance, or RS analysis, appears to be reaching a critical juncture. The long-term support, line h, from the 2009 lows was broken early this year. It has rallied from the lows and needs to move through its downtrend (line g) and its previous peak (see arrow) to signal it is outperforming the S&P 500
- A drop in the RS below this year’s lows would be negative
- The on-balance volume (OBV) is acting much stronger than prices, as it shows a pattern of higher lows in contrast to the price action. It is well above short- and long-term support (line i)
- FCX has rebounded back to first resistance in the $47 area. The 38.2% resistance has been overcome, which indicates the 50% resistance at $51.20 should eventually be reached
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An interest rate tease in The Wall Street Journal sends the market into an optimistic tizzy -- but one that doesn't end quite at the top.
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