Comex High Grade Copper Futures (HG) Technical Analysis – December 25, 2014 Forecast

A trader has to take a look at the Weekly Nearby Comex High Grade Copper chart to understand what is going on in the March Comex High Grade Copper market. The main range on the Nearby chart is the December 2008 bottom at 1.5640 and the February 2011 top at 4.7955. Its retracement zone is 3.1800 to 2.7985.

Recently, copper broke through the lower or Fibonacci level at 2.7985, reaching a low at 2.7775. The subsequent reversal bottom at this level suggests buyers came in to defend against an acceleration to the downside. Despite this apparent shift in sentiment to the upside, there was very little follow-through. This is an indication that the short-sellers are still running the show.

This week’s weak trade suggests sellers are going to make another run at 2.7985. This time if the volume is on their side, look for a break to a new contract low as we end the current year.

The basic supply/demand fundamentals indicate a bearish tone because of a huge surplus. With the global economy slowing especially in China, the surplus is expected to linger into 2015. Additionally, cash strapped Russian producers may have to dump copper on the market. This could cause the surplus to rise.

The tone of the market into 2015 will be determined by trader reaction to the major Fibonacci level at 2.7985. With copper supply so high even if there is a short-covering rally because of short-term oversold conditions, the upside is likely to be limited as bearish traders stand ready to short this market again at more favorable price levels.