Can Copper’s Recovery Continue?
Copper futures were sharply lower last week, with traders in heavy liquidation mode due to continuing credit concerns and sharply lower world stock indexes. However, there are signs that the Copper sell-off may be through for the near-term. Prices are moderately higher this morning, as a strike at Grupo Mexico SAB’s San Martin mine continues after a Mexican court refused to issue a halt to the work stoppage. In addition, a rebound in other members of the base metals group this morning – mostly on bargain hunting buying – is also supporting Copper prices, despite a moderate rise in LME Copper stocks, which increased by 475 tons this morning to stand at 121,025 mt. Nevertheless, Copper stocks are still down nearly 35% for the year. Should the recent liquidity crunch come to an end and calm return to the financial markets, Copper futures have the potential to recover recent losses, as traders dismiss the panic selling that has gripped the commodity markets and once again focus on the fundamentals.
Looking at the daily chart for December Copper, we notice the sharp rebound in prices from Thursday’s lows at 304.70. Though still weak, the 14-day RSI has rebounded from oversold territory, with a reading of 32.90. After Thursday’s steep sell-off, the next resistance point remains well above current prices, with near-term resistance seen at Thursday’s highs of 332.00. Support comes in at the Thursday lows of 304.70. In early trade, December Copper is trading at 320.80, up 6.05.
Mike Zarembski, Senior Commodity Analyst
