Comex High Grade Copper Price Futures (HG) Technical Analysis – Rapidly Approaching Major Upside Retracement Zone

Multiple factors helped drive July Comex High Grade Copper futures to their highest level since May 2^nd on Friday. These factors included falling copper inventory, concerns over supply in Chile and stronger-than expected import demand in China.

Falling copper stocks at LME warehouses helped provide support. Copper inventories fell 9,475 tonnes on Friday to 276,875 tonnes. This marked a 20 percent decline from the seven-month high in May.

Chilean Copper giant Codelco restarted operations at mines in the northern part of the country after weather issues forced a series of precautionary closures.

Finally, China reported a jump in exports and imports for May last week which could be an indication the economy is improving despite rising lending rates and a cooling property market.

Technical Analysis

The main trend is up according to the daily swing chart. It turned up on June 8 when the market took out the swing top at $2.5960. The uptrend was confirmed on June 9 when buyers also took out the swing top at $2.6195.

If the upside momentum continues then the next swing top comes in at $2.6945, followed by another main top at $2.7310.

The main bottom is $2.5155. A trade through this level will change the main trend to down. With the market nearing a major retracement zone, traders should watch for a potentially bearish closing price reversal top.

The main range is $2.8400 to $2.4725. Its retracement zone at $2.6565 is the primary upside target. Trader reaction to this zone is going to determine the longer-term direction of the market.

Bullish traders are going to try to cross over the 50% level at $2.6565 then blast into $2.7000. Overtaking this level will indicate the buying is getting stronger. Bearish traders are going to try to prevent a breakout to the upside and form a potentially bearish secondary lower top.

Forecast

Based on Friday’s close at $2.6495, the direction of the copper market is going to be determined by trader reaction to the major 50% level at $2.6565.

A sustained move over $2.6565 will signal the presence of buyers. This could create the upside momentum needed to challenge the main top at $2.6945 and the major Fibonacci level at $2.7000.

The inability to overcome $2.6565 will indicate the presence of sellers. This could trigger the start of a retracement to the downside.