Comex High Grade Copper Futures (HG) Technical Analysis – October 25, 2016 Forecast

December Comex High Grade Copper futures surged on Tuesday in reaction to a weaker Chinese Yuan. The weaker currency sparked buying for import to China. Reuters also reported premiums for refined copper in Shanghai bond rose $5.00 to $75.00, the highest level since March.

Prices were also supported by a surge in Shanghai zinc. The industrial metal rallied into its 5-percent upside limit on Tuesday to its highest level since 2011, as a cut in capacity across China’s steel and coal sectors boosted prices of steelmaking ingredients.

Finally, copper also drew support from manufacturing PMI surveys in the U.S. and Europe that showed the best readings of the year so far. Metals in London rallied 1 to 2 percent with copper hitting its highest level since mid-month.

The price action suggests that short-sellers may have been caught off-guard by the sudden change in events and were forced to cover furiously. There are still ample supplies out there that could offset demand by China so gains could be limited.

Technical Analysis

The main trend is down according to the daily swing chart, the price action, however, indicates that momentum may be shifting to the upside.

The minor trend turned up on the trade through $2.1115, however, the main trend won’t turn up unless $2.2025 is taken out. A new main bottom was formed at $2.0845.

The short-term range is $2.2025 to $2.0845. Its retracement zone at $2.1435 to $2.1575 is the primary upside target. Since the main trend is down, sellers may show up on a test of this zone.

The longer-term upside target is a retracement zone at $2.1750 to $2.2015.

Forecast

Based on the current price at $2.1380 and the earlier price action, the direction of the copper market the rest of the session is likely to be determined by trader reaction to two levels – $2.1435 and $2.1340.

A sustained move over $2.1435 will indicate the presence of buyers. This could trigger enough upside momentum to challenge the short-term Fib level at $2.1575. This is another trigger point for an acceleration into a resistance cluster at $2.1750 to $2.1765.

A sustained move under $2.1340 will signal the presence of sellers. The daily chart is wide open under this angle with the next potential target angle coming in at $2.1030.

Look for the bullish tone to continue on a sustained move over $2.1435 and a bearish tone under $2.1340.