Comex High Grade Copper Price Futures (HG) Technical Analysis – Profit-Takers Entering the Picture

December Comex High Grade Copper futures are retreating from a three-year high early Wednesday, as speculators and hedge funds locked in profits after a steep rally and as the market neared a long-term resistance level.

On Tuesday, the market spiked higher against a backdrop of strong results from mining firms and talk of shortages in some industrial metals. The move surprised most traders and some feel that it was unjustified since there was nothing new fundamentally. Some traders blamed the sudden spike in prices to euphoric trend and momentum traders.

The bearish factors may be starting to pile up, suggesting the market may be ripe for a near-term correction. Some investors worried about more copper supply coming on the market after Indonesia’s mining minister said the country expected to strike an agreement this month to allow Freeport McMoRan, Inc. to keep operating its huge Grasberg copper mine in Papua in the coming decades.

Additionally, more output was also possible at BHP Billiton’s Escondida copper mine in Chile, which has recovered from a six-week strike faster than expected, with output now running at normal levels.

Technical Analysis

The main trend is up according to the daily swing chart. A new minor top has formed at $3.0360. A trade though this level will signal a resumption of the uptrend with the next target the October 29, 2014 main top at $3.0625.

The main trend will turn down on a trade through $2.8935.

The short-term range is $2.8935 to $3.0360. Its retracement zone at $2.9650 to $2.9480 is the first downside target. Since the main trend is up, buyers may show up on the initial test of this zone. If it fails, there is room to the downside with $2.8935 the next major target.

Forecast

If the early downside momentum continues then look for a break into an uptrending angle at $2.9710. Since the main trend is up then look for a technical bounce on the first test of this angle. This is followed by $2.9650 and $2.9480.

The zone should be considered support, however, $2.9480 is also the trigger point for an acceleration to the downside with $2.8935 the next key target.

The first upside target is the minor top at $3.0360. This is followed by the long-term top at $3.0625.