Copper prices started the week on Monday August 20, positively on the Shanghai Futures Exchange Board, finding support from an ease in recent trade tensions between China and the United States, due to news that two nations are working on plans aimed at ending the so-called dispute, giving markets some reason for optimism. A softer dollar has also provided support to base metals prices as well.
From the chart perspective, copper has shown some reversal efforts during last several weeks. Although not being successful enough to sustain above February’s high at $6,170, there are signals that encourage market participants to consider a reversal at current levels.
As a big image, Copper’s trend is up on the weekly scale. Therefore, all mid-term downside moves are interpreted as correctional ones, preparing for another upward move.
As demonstrated below, Copper started the weekly rally from early 2016 from around $4,280 to almost double up in two and a half years in mid-2018. The super-cycle correction started from $7,300 and has continued down to hit $5,730 where it recovered some of the lost value during last week’s trading sessions.
Looking to the price action more technically, half of the rally has been retraced so far, and price has reached to one of the mid-channel lines depicted on the chart. MACD oscillator has moved below zero and it is getting prepared to form a positive hidden divergence to rebound to the main bullish trend again, but the question is “where is the ultimate bottom?”
Looking at the end of the chart on a daily basis reveals some aiding points to find the answer. First of all, a close low below previous low can be spotted accompanied by a positive regular divergence which supports the reversal scenario, at least in short-term. This probable upward move would accelerate above $6,300. But as an alternative scenario, breaking below $5,770 level, would push prices further downwards toward 61.8% retracement of the whole rally laid at $5,400 zone where overlaps the bottom channel line as well.
To conclude from above, short term positive signals spotted, encourage us to expect a short term rebound from the recent low at $5,730 level, but it is worth noting that this move could be extended to higher levels in case the tough resistance at $6,300 is passed and sustained above successfully. On the flip side any penetration below the previous low could accelerate the bearish sentiment to reach $5,400 zone, a very supportive area where we believe can end up the bearish correctional move started from mid-2018.