Copper Sentiment Agrees With Technicals
Sentiment for copper prices appears mixed to negative. The worst prospects for demand may be in China, where copper imports have a large effect on worldwide prices. Currently, the majority of China's copper pipe manufacturers now believe prices for their feedstock will decline further. At the same time, Chinese authorities have indicated very recently that they may crack down on the ability of businesses to import the metal as a way of providing collateral for business loans. Halting that practice may result in more copper being released from bonded warehouses where it sits unused, and that is likely to drive price down.
Our technical analysis continues to agree with that downward forecast, although we may see price rise for a few weeks even in the face of immediately bearish sentiment before the decline sets in again.
In our projection into 2015-2016, we still believe the 1.78 area is a likely long-term downward target, although the path from here to there will have some zigzags along the way. The monthly chart for our long-term projection can be found at our website.
Nearer-term price targets also remain unchanged, but it is helpful to see how price is behaving with respect to the downward channel on the weekly chart below. Clearly price recognized the resistance we identified as being just overhead at the end of May, and it has fallen away from that area. Major stepping-stone support levels to watch through the remainder of the year include 2.67, 2.52, and 2.34.
The daily chart shows price as retracing part of the recent wave 'i'. We believe the retrace can go a bit higher, and the area from 3.1220 to 3.1500 represents a good place to watch for the downward trend to resume. We have drawn a speculative path on the daily chart below.
It is important to keep in mind that price can accelerate downward at this point. It is safer now to sell from minor highs rather than to try catch upward moves.