September High Grade Copper futures closed lower on Thursday as traders took profits following a solid three day rally from 3.0365 to 3.2060. The daily chart indicates the market may be set up for a break into a retracement zone at 3.1212 to 3.1012. Since the main trend is up, buyers may step in at this zone.
Besides the retracement zone, uptrending Gann angle support moves up to 3.1165. On the upside, resistance is at 3.1940.
Fundamental factors also played a role in today’s weak close. Firstly, many investors are heading to the sidelines ahead of China’s Trade Balance repot on Wednesday. The recent better-than-expected purchasing managers’ index may have been a sign the Chinese economy turned. This week’s report may confirm this assessment. Some traders may be waiting for confirmation before stepping back into the market.
Today’s stronger-than-expected U.S. ISM Services PMI report may have also influenced investors. Since the Fed is gauging the strength of the economy while it decides whether to begin tapering its monetary stimulus, many investors may have decided to pare positions after Monday’s strong economic report. This could have been another reason behind today’s weakness.
Monday’s inside move indicates investor indecision and uncertainty. The current chart pattern suggests the possibility of a two-sided trade over the near-term. The market will either go after the recent tops at 3.2060 and 3.2340, or head into a retracement zone at 3.1212 to 3.1012.