Comex High Grade Copper Price Futures (HG) Technical Analysis – Reversal Top Could Start 2 to 3 Day Correction

Speculative buying lifted December Comex High Grade Copper futures to their highest level in three-years, but concerns over North Korea encouraged investors to book profits, leading to the formation of a potentially bearish closing price reversal top. Traders were also influenced by weak factory orders that could weigh on future demand.

According to Reuters, momentum funds and speculators in China are betting on higher prices as copper enters its ninth consecutive week of gains, with the net long position in COMEX copper rising to a record high last week.

New orders for U.S.-made goods saw their biggest drop in nearly three years in July.

Technical Analysis

The main trend is up according to the daily swing chart, however, Tuesday’s price action indicates the selling may be greater than the buying at current price levels.

Right now, the rally is all about speculative demand and upside momentum. Tuesday’s higher-high, lower-close has put the market in a position to form a potentially bearish closing price reversal top. This chart pattern doesn’t indicate the trend is getting ready to turn lower, but it could mean the start of a 2 to 3 day correction equal to 50% to 61.8% of the last rally.

Taking out $3.1785 will negate the chart pattern. This could create enough upside momentum to test the August 25, 2014 main top at $3.2345 and the July 13, 2014 main top at $3.2415.

Crossing to the strong side of the steep uptrending angle at 3.2335 will put copper in an extremely strong position.

If the selling pressure continues then look for a break into the support cluster at $3.0635 to $3.0625. If this area fails to stop the selling pressure then look for the move to extend into the short-term retracement zone at $3.0360 to $3.0025. Since the main trend is up, buyers are likely to come in on a test of this zone.