Watch copper for a profitable breakout

August 15, 20162 Comments

 

Industrial metals are not as sexy, shiny or as appealing to the doomsday crowd as gold and silver are. Nor are they as widely followed as oil has been by retail traders and investors. But the industrial metals group, as illustrated by the $BCOMIN Bloomberg Industrial Metals index (consisting of futures contracts on copper, aluminum, nickel and zinc) is showing technical signs of an exciting turnaround. A bullish break of the downtrend and a crossing of the 50 through the 200 day MA make this chart attractive. The chart shows a base top of 100 at this point and a break of that level could be verification of a bottom.

ind metals

I like to break index charts down where possible. It’s a little difficult to find pure charts in stockcharts.com on all 4 components (I found Nickel, Aluminum and Copper, but nothing for Zinc). But judging from the obvious strength in nickel and aluminum, i had to assume that zinc has been on a recovery path as well. Of the 4 metals in the index, the later staged component is copper. It hasn’t been breaking the trendline the way the Bloomberg index has, nor as well as nickel and aluminum have (charts not shown).

 

Copper is still in the basing stage. 

 

The $COPPER chart below shows us a higher low in June, but no breakout through the $2.30 lid that has contained it for the calendar year. The MA’s are meandering. Thus, traders may want to keep their eyes open here. Should copper break $2.30 and stay above that level for a few days, you could be seeing the beginning of a recovery–and be catching a Phase 2 breakout (please see my book Sideways for more on that subject) early in the game.

copper

Smart traders will wait patiently for such a breakout. As always, an anxious trader attempting to find the bottom may get kicked in the bottom instead. Patience is a virtue in the world of the technical trader.

 

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