Traders watch copper closely – it can be a good leading indicator of global industrial and commodity sentiment. A trade signal in Friday’s trading on the daily chart could be important not just for copper markets, but for resource stocks and share markets generally.
Have a look at this chart from the CMC Tracker platform:
Copper – Daily
Not only has copper bounced off support around U$3.30 a pound, the daily chart shows a breach and re-entry of the lower Bollinger Band – a classic buy signal. It’s not the strongest possible BB signal – the bands are widening – but combined with the bounce of support, this could slow any appetite for “shorting” copper, and may have some traders buying.
How high could copper go? A simple Fibonacci retracement (61.8%) of the May fall would see a price around $3.61. Of course, a fall through $3.28 would negate this scenario.
The global growth outlook appears to be lining up the fundamental ducks. After significant slowing, central authorities in China have stated their intention to stimulate the economy with a view to stabilising growth around 7.5% – 8%. Recent US data shows an economy clearly in recovery, albeit with modest growth. And Europe has taken further steps in its glacial progress to deal with the causes of its current problems.
This improved scenario not only makes the outlook for copper brighter. Global share markets are currently pricing a high risk of financial catastrophe. If the world is pulling back from the brink of economic disaster the risk premium currently reflected in Asian and North American markets is likely to lift, dragging share prices higher.
For today’s doubters, we recall the words of legendary investor Sir John Templeton, “Bull markets are born on despair, rise on scepticism…….”