Comex High Grade Copper Price Futures (HG) Technical Analysis – Balanced Supply/Demand Could Lead to Range Bound Trade

December Comex High Grade Copper finished the session lower on Friday, but also posted its fifth consecutive quarterly gain. The industrial metal was primarily driven by a weaker U.S. Dollar and expectations of strong demand in top industrial metals consumer China.

Going forward it’s difficult to find a driver at this time to send prices higher or lower. The U.S. Dollar is expected to be underpinned by the strong possibility of a rate hike before the end of the year, and investors have expressed some concerns over the overall global economic recovery. China’s stable growth may have even slowed down a bit.

Supply disruptions helped support prices earlier in the year, but lately production has been normal so we don’t expect this to be a factor at this time.

Putting it all together, the supply/demand situation appears to be more balanced than it was earlier in the year, suggesting we may see a rangebound trade during the fourth quarter.

Daily Technical Analysis

The main trend is up according to the daily swing chart. The trend turned up last Thursday when buyers took out the previous swing top at $2.9665. After a short-term pullback to $2.9050, the rally was extended to $2.9925, where it stalled on Friday, leading to a lower close for the session.

The main range is $3.1785 to $2.8940. Its retracement zone at $3.0365 to $3.0700 is the primary upside target. This zone is important because it may ultimately determine the direction of the market this quarter.

Aggressive counter-trend sellers may show up on a test of this zone in an effort to form a potentially bearish secondary lower top. Buyers are also going to have to be aggressive to drive the market through this zone. Their mission will be to solidify the main bottom at $2.8940 and eventually challenge the main top at $3.1785.

On the downside, support is layered inside a major retracement zone at $2.9150 to $2.8525. This zone helped form two main bottoms at $3.9050 and $2.8940 last week.

We continue to have a longer-term upside bias as long as $2.8525 holds as support. If this occurs then the next major trading decision will be on a test of $3.0365 to $3.0700. At that point, investors will have to decide to make a run at a new high, or start another sell-off.