TA of the Day: Will Copper’s Support Hold and Ignite a Major Rally?

copper Oil prices fell sharply, falling to their lowest level in four months on concerns about slowing Chinese demand and rising production.

China is the world’s largest consumer of copper, using it extensively in construction, manufacturing, electronics and energy sectors.

Because of this, the amount of copper China needs has a big impact on copper prices everywhere.

China’s copper market appears to be showing signs of improvement after a significant drop in demand.

Buyers are cautiously returning after prices fell from record highs.

Important signs that things may be improving include higher import duties and lower inventory levels.

The energy sector is also spending more money, which is expected to lead to an increase in copper consumption as they will need more copper for their projects.

Copper fundamentals seem to provide a bullish case, but what about the technical indicators?

you welcome in Teaching Assistant of the Day (TAOTD)! 👋

Here is the daily chart:

📈 Technical analysis of copper on the daily chart

Using the technical analysis concepts we covered in our Forex course, let’s analyze copper.

Simple moving averages:

• 10 period simple moving averageIt is located at the level of 4.152. The current price is less This level indicates short-term bearish momentum. The slope is downindicating short-term weakness recently.
• 50 period simple moving averageIt is located at the level of 4.470. The price is: less This level indicates medium-term bearish momentum. The slope is downwhich reinforces the weakness in the medium term.
• 200 period simple moving averageIt is located at the level of 4.116. The current price is around This level indicates a potential support area. The slope is to the topindicating a long-term uptrend despite recent price declines.

Relative position of moving averages:

• Moving averages arrangementFrom top to bottom: 50 SMA (purple) > 10 SMA (orange) > 200 SMA (blue)
• Bearish alignment: The 50 simple moving average is above The 200 simple moving average during a price decline indicates a downtrend. This is often referred to as a “death cross” formation.
• Short term vs long term: 10 SMA is less 50 SMA but above The 200 simple moving average, indicates short-term weakness but potential long-term support.
• Convergence: The moving averages are converging, which may indicate a potential change in trend or an approaching consolidation period.
• Transfers: The 10-year SMA recently crossed above the 200-year SMA, which is a moderately bullish signal. However, a more significant bullish signal would be if the 10-year SMA crossed above the 50-year SMA.

If you are new to moving averages, read Pipsology School’s lessons on how to use moving averages.

Williams %R (14)

• Williams %RThe current reading is -71.85, which indicates that the market is in an oversold zone. This suggests that the price may soon encounter support and may be about to rebound.

If you are new to Williams %R, read our Pipsology School lessons on how to use Williams %R.

🕵️ Key Notes

Price movement:

• DowntrendThe price has been trending lower since mid-June, with smaller highs and lows. The recent low at 4,000 is a key level to watch.
• Steep decline: There has been a significant price decline from early July until now, with several long red candles indicating strong selling pressure.
• Trying to get to the bottom: The price seems to have found some support around the 4.08-4.10 level, which closely coincides with the 200 simple moving average.
• Bullish reversal candle: The last candle is a strong green (bullish) candle, indicating strong buying pressure and a possible short-term reversal or at least a temporary pause in the downtrend.
• StabilityThe price is showing signs of stability around the 4.20 level.

Support and resistance levels:

• SupportsThe immediate support level is located at around 4.116 (200-period simple moving average). Recently, the price has bounced off the 200-period simple moving average, indicating potential short-term support.
• resistanceImmediate resistance is located at 4.152 (10-period simple moving average) and 4.470 (50-period simple moving average).

If you are new to the concept of “support and resistance”, read our Pipsology School lessons on how to use support and resistance.

Moving averages:

• Price to Moving Averages: Current price between The 10-period simple moving average and the 200-period simple moving average, having recently crossed above the 200-period simple moving average. This could indicate a potential bullish turn in the near term.
• MA pressure: The distance between the moving averages has been determined. Narrowingwhich often precedes a large price movement (uncertain trend).

Williams %R:

• A Williams %R indicator turning higher from oversold levels indicates a potential price rebound.

Market structure, market composition:

• Recent swing highs and lowsThe chart shows lows around 4.00 and lows around 4.60.
• break the frameThere was a significant drop in price below the previous support level at 4.32, indicating a continuation of the downtrend.
• Change personality (chouch)A ChoCh pattern will be observed if the price breaks above the recent low at 4.69, indicating a potential shift in the market structure from bearish to bullish.

🤔 Possible trade scenarios

He is Copper buy or sell?

The following trading scenarios are provided for educational purposes only. Since they do not include full risk management practices, they are not intended to serve as actual trading recommendations, but rather as food for thought to help you generate your own trading idea.

Long bias:

• Entry pointConsider entering a long position if the price finds support near 4.116 and shows signs of a bounce, such as a bullish candlestick pattern or positive divergence on the Williams %R. Additionally, a break above the resistance level at 4.152 could signal a potential recovery.
• Stop lossConsider placing a stop loss below the support level around 4,000 to manage risk.
• GoalWe expect a move towards the 4.400 level and above if the uptrend resumes.
• RationaleTargeting the 4.400 level depends on the previous resistance level, which may act as an important level for taking profits. If the price is able to penetrate this level, this indicates strong buying pressure and the possibility of further rise.

Short bias:

• Entry pointConsider entering a sell position if the price fails to hold the support level at 4.116 and shows signs of bearish momentum, such as a strong bearish candlestick pattern or the Williams %R indicator remains in the oversold zone.
• Stop lossPlace a stop loss above the recent high at 4.200 to manage risk. This level is crucial as a break above it would invalidate the bearish setup.
• GoalThe initial target could be the support level at 4.0000. If the downward momentum continues, expect further decline towards 3.800 or lower.
• RationaleThe initial target is the 4.000 level due to it being a psychological and historical support level. If the price breaks this level, it will indicate more selling pressure and the possibility of a further significant decline towards the next support level at 3.800.

📝 TAOTD Summary

• directionThe long-term trend appears to be bullish with price around the 200-period simple moving average, but the short-term and medium-term trends are showing significant bearish momentum with price below the 10-period and 50-period simple moving averages.
• Main levelsSupport at 4.11 and resistance at 4.152.
• PaidThe Williams %R indicator indicates an oversold condition, indicating a possible short-term recovery.
• market structure, market compositionThe latest BoS indicator is pointing to a continuation of the downtrend. The next volatility could occur if the price breaks above the recent higher low at 4.690, indicating a potential shift in the market structure from bearish to bullish.
• Moving average analysisThe downward slopes on the 10- and 50-period simple moving averages indicate strong bearish momentum in the short and medium term. The 200-period simple moving average, with its upward slope, indicates crucial long-term support.

The recent price action suggests a potential short-term bullish reversal or at least a temporary pause in the downtrend. However, to confirm this, the price would need to break and hold above immediate resistance levels, especially the 10-day SMA and the 50-day SMA.

Watch for follow-through buying in the next few trading sessions to confirm if this is indeed a reversal or just a short-term bounce within the larger downtrend.