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April 13, 2007

Copper -- Into Resistance
by Bob Hoye

Technical observations of RossClark@shaw.ca

When measured on a daily, weekly and monthly basis, copper prices have now moved from an oversold position in January to an overbought position. While it would be easy to shrug off any one signal, the cluster indicators in various time frames suggests that another correction is right around the corner.

The monthly chart is generating only its second Sequential Sell signal since 1980. The previous one was followed by an outside reversal month that subsequently tested its major support.

Over the past 50 years, typical rallies from oversold levels have retraced to basic resistance lines and produced an improvement in the weekly RSI(14) of 29 to 42 points. The current rally has generated an improvement of 35 points in the RSI. Prices are also back into the heart of the consolidation of last May through October and have managed to produce a weekly sequential sell setup. Over the past three decades such setups have been evident within two weeks of many interim highs.

From a seasonal perspective, we are approaching the end of a favourable time window. The next seasonal strength in copper should be anticipated to start after mid-June.

On a daily basis, the past two days have registered upside exhaustion.

Quadra Mining has been a favourite in the sector, moving with copper prices. The action since the beginning of the month is exacerbated by the announcement of an offer to acquire International Molybdenum. Upside exhaustion alerts are being produced so we'd be inclined to lighten up. The three previous exhaustion alerts have been followed by corrections to the 50-day moving average.

Quadra

Another leader in the base metals has been FNX Mining. It is also showing signs of excess, with weekly exhaustion alerts. A 20% correction would not be a surprise.

FNX Mining

Bob Hoye
Institutional Advisors

The opinions in this report are solely those of the author. The information herein was obtained from various sources; however we do not guarantee its accuracy or completeness. This research report is prepared for general circulation and is circulated for general information only. It does not have regard to the specific investment objectives, financial situation and the particular needs of any specific person who may receive this report. Investors should seek financial advice regarding the appropriateness of investing in any securities or investment strategies discussed or recommended in this report and should understand that statements regarding future prospects may not be realized. Investors should note that income from such securities, if any, may fluctuate and that each securitys price or value may rise or fall. Accordingly, investors may receive back less than originally invested. Past performance is not necessarily a guide to future performance.

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Copyright © 2003-2008 Bob Hoye

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