Comex High Grade Copper Price Futures (HG) Technical Analysis – Funds Need to Buy to Stop the Price Slide

December Comex High Grade Copper futures are trading flat early Friday after another huge break on Thursday. Traders are saying that commodity funds are stepping in to stem the price slide. Earlier in the week, it was commodity fund liquidation driving prices sharply lower.

On Tuesday, September 12, for example, commodity funds aggressively cut positions after LME warehouse stocks climbed by more than 10,000 tonnes. According to Reuters, copper stocks in LME approved warehouses rose by 10,300 tonnes to 218,725 tonnes.

On Thursday, copper fell to a four-week low after some weaker than expected data from China pointed to slowing demand from the metal’s top consumer. Chinese data showed slower than expected growth in investment, factory output and retail sales but a rebound in property sales and construction starts is likely to keep China’s overall growth relatively robust and on target.

Hedge and commodity funds had basically saturated the market with long positions and the market ran out of buyers. They had expected the recent momentum to carry the Chinese economy for at least a month longer, given the recent strong PMIs and price action. However, speculator positions grew too large for the market to handle and something had to give.

Copper buyers were also counting on the U.S. Dollar to continue to weaken and when it rallied earlier this week, demand for dollar-denominated copper plunged.

Technical Analysis

The main trend is up according to the daily swing chart, but momentum is trending lower. The current price is trading in a position to challenge a pair of main bottoms at $2.8935 to $2.8795. Taking out these levels will change the main trend to down according to the daily swing chart.

The short-term range is $2.8935 to $3.1785. Its retracement zone at $3.0025 to $3.0360 is now resistance. Closing below this zone is further confirmation that momentum is trending lower.

The main range is $2.6510 to $3.1785. Its retracement zone at $2.9150 to $2.8525 is the primary downside target. Inside this zone is an uptrending angle at $2.8910. This is a valid downside target also. Watch for a technical bounce on a test of this zone because to some buyers, it represents value.

Forecast

Based on the current price at $2.9560 (0506 GMT), the market can move in either direction today. The direction will be determined by momentum.

Upside momentum will likely drive the market into the short-term Fibonacci level at $3.0025, the downtrending angle at $3.0185 and the 50% level at $3.0360. The latter is the trigger point for an acceleration to the upside.

If the momentum is to the downside then look for a test of $2.9150 and $2.8935. If buyers don’t come in to stop the price slide on a test of these two technical points then look for a change in trend to down. This could lead to further erosion of support to $2.8910, $2.8795 and $2.8525.

The direction of the market will be determined by momentum and investor sentiment. If the U.S. Dollar rebounds then prices are likely to continue to fall. If the Greenback weakens then look for buyers to come in to support copper prices.