Copper posted a wicked two-sided trade on Friday as investors reacted to whip-saw action in the U.S. Dollar, technically oversold conditions and concerns about future demand.
March Comex High Grade Copper futures finished the session at $3.1805, down $0.0185 or -0.58%. The market also finished the week down 1.18%.
Daily Swing Chart Analysis
The main trend is down according to the daily swing chart. A trade through $3.1785 will signal a resumption of the downtrend.
The market is down 14 sessions from its last major top at $3.3220. This puts it in the window of time for a potentially bullish closing price reversal bottom. Be careful selling weakness because this market is susceptible to volatile two-sided intraday swings.
The trend will turn to up on a move through $3.2765. However, there is a wall of resistance formed by former tops ranging from $3.3055 to $3.3220.
With copper, it’s all about value. Aggressive hedge fund buying drove the market from $2.9430 to $3.3220 from December 5 to December 28. The buying stopped when the market hit a series of longer-term resistance levels. Hedge funds quit buying strength, momentum slowed and the profit-taking began.
If the hedge funds still believe in the long side then they are likely to re-enter when they see value. Based on the main range of $2.9430 to $3.3220, the value zone is the 50% to 61.8% area at $3.1325 to $3.0880.
I expect to see further downside action this week with the main target $3.1325 to $3.0880. I also expect to see buyers show up on a test of this zone. Hopefully, the U.S. Dollar holds steady-to-higher to allow copper to break into the support area. A weaker dollar may bring in the buyers earlier than expected because copper is a dollar-denominated commodity.