Wednesday Evening 25 January 2012
Copper had a recent upside breakout from a wedge and has recently
been consolidating the gains made from that breakout. You can see it
happened, once the 3.45 - 3.50 area was surpassed, three weeks ago.
There were no opportunities to buy a pull-back. It appears there is
sufficient "energy" built up while in the wedge trading range that can
sustain higher prices.
There may be some resistance from the 3.8460 swing low from last
May, which is just below a small gap area 3.8610 high from September. We also drew a hiorizontal line from the wedge trading
range high, but you can see price sailed right through it, last week.
We have been waiting to see how a correction may develop that could set up a buying opportunity.
The daily chart gives more detail, and it has been the small trading
range of the last five trading days that held our attention. Whenever
you see this kind of sideways movement, it can be stopping action,
for a reversal, or just a resting spell, prior to a resumption in the
direction preceding it. Given that price has just rallied strongly out of
the wedge formation, we viewed the past five days as the market's
way of correcting. Instead of price retracing, like most corrections,
price has been consolidating, and that is a sign of strength, in this
Buyers have been absorbing all the sellers, keeping price stable and
higher. Those waiting for a pull-back to buy may not get the
opportunity, and if we are right in our assessment, new buyers will
have to pay up to get in, or get left behind. That kind of scenario is
characteristic of a stronger market. Early in the Wednesday session,
we entered at 1.7930, and the reasoning becomes clearer on an intra
day chart, next.
[The last bar is as of around 10 a.m., as we viewed copper as a buy,
and it does not reflect the rally which followed.]
The lower time frames are used for timing entries, once the stage has
been set as described from the weekly and daily charts. Tuesday's
low was higher, and it was followed by ease of upward movement
on sharply increased volume. [See activity of 24th]
Coming into Wednesday morning, on a pull-back from overnight highs,
we saw yet another likely higher low, followed with another rally on
increased volume, and that was our signal to buy. If we were right
in reading the market activity, price should work higher, and that is
exactly what developed.
So far, we see no signs of sellers entering in volume to push price
lower. That could develop overnight, or during the Thursday day
session. Until it happens, we view copper as likely to yet work higher.
Challenging this year's highs is not out of the realm of possibilities, but
we never know how price will develop, moving forward. If price
continues higher this week, and into next week, 3.75 - 3.80 could
become very important support for any retest.
Long from 3.7930