Comex High Grade Copper Price Futures (HG) Technical Analysis – Building Support Base, but Stronger Dollar Limiting Gains

December Comex High Grade Copper continued to alternate between higher and lower closes on Wednesday as bullish investors tried to build a support base after a prolonged move down in terms of price and time.

After declining for 13 sessions, copper posted a potentially bullish closing price reversal bottom on September 22. Although there has been no really strong follow-through rally to confirm the chart pattern, the reversal has definitely slowed the selling.

Underpinning the market is optimism that demand would outstrip supply over the longer-term. Traders said that prices were also supported by appetite for cyclical assets in the broader markets, with global equity markets rising as Republicans rolled out their U.S. tax reform plan.

Despite the supportive longer-term fundamental base, gains were capped on Wednesday due to the stronger U.S. Dollar. The rising Greenback could continue to hinder the rally in dollar-denominated copper if the chances of a rate hike by the Fed in December continue to rise.

Daily Technical Analysis

The main trend is up according to the daily swing chart. Despite the prolonged sell-off, the market never crossed a swing bottom. All the move did was wipe out about a month’s worth of gains.

Late last week, copper stopped at $2.8940. This was slightly above the main bottom at $2.8935. A trade through this level will turn the main trend to down. This could lead to an almost immediate test of the next main bottom at $2.8795.

The major retracement zone is $2.9150 to $2.8525. The bottoms at $2.8940, $2.8935 and $2.8705 all fall inside the zone. Even if the trend changes to down on the swing chart, I think value-seekers may like the price if it remains inside the zone.

Bearish traders are going to have to be careful selling weakness inside this zone because they may get caught on the wrong side of a short-covering rally.

Holding above the major 50% level will indicate the presence of buyers. Overtaking the short-term pivot at $2.9440 will indicate the buying is getting stronger. Overcoming this week’s high at $2.9665 could trigger a move into the September 18 top at $2.9935.

The main range is $3.1785 to $2.8940. If buyers can overcome the resistance level, we may see a move into the retracement zone at $3.0375 to $3.0700.