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Copper Prices

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  • Copper Prices

    Cop This For a Quick 10% Gain
    by Gabriel Andre

    Copper prices have surged from US$2,770 per tonne just before Christmas to $4,465. It's a 61% rise. Just for the last 30 days, prices have jumped by 28%.

    This is due to Chinese imports. 300,000 tonnes of copper have been imported in China since the beginning of the year. As copper is a driver on the base metals markets, other prices (nickel, tin, aluminium, zinc) have also bounced.

    The key motivation for the Chinese is to re-constitute inventories and stocks at low prices. Remember: last year, in June 2008, copper prices were near $9,000 per tonne. The current levels are therefore a fantastic opportunity to secure future needs. Those future needs come from building and construction projects (roads, ports, rails...).

    On the London Metal Exchange, copper inventories have decreased seriously after they had reached extreme high levels those past few months. Around 500,000 tonnes remain on stock.

    Let's focus on the chart now. Last month, the price action broke an important first resistance when it jumped above the level of $3,700. This level was a previous low posted in last October (point A on the chart) which became a new high several times during the following months (points B, C and D).

    The target for the medium-term current bullish momentum may be now the 38.2% Fibonacci retracement ratio, around $5,000. This is both a psychological level and that's why this is where the price action posted a low during the broad decline in the first fortnight of October 2008 (point F).

    From the current levels, the objective of $5,000 is another 12% move on the upside. From this target a correction is more than likely. First, the rebound in terms of percentage gains is already impressive, especially in such a short-time frame. Second, because the oscillators are turning overbought. The RSI has just crossed above the 70 level.

    This is confirmed by the 40-day technical momentum indicator (in green) that has just reached extreme high levels and may peak soon.

    That's why we expect a completion of the rebound around $5,000, followed by a correction.

    Good investing,

    From this morning's Money Morning.
    "There's one way to find out if a man is honest-ask him. If he says 'yes,' you know he is a crook." Groucho Marx