Copper is starting to soften below the $400.00 level as the global demand story comes into question due to the ongoing lockdowns in Europe and concerns that growth in China will be weaker during the second fiscal quarter.
Even news that the US economy may be getting a $3 trillion infrastructure and green energy stimulus package failed to send copper prices and other key industrial metals higher this week.
Persistent weakness below the benchmark $400.00 level could cause traders to become nervous and start to exit existing long copper positions on both the spot and futures market.
The technicals are showing that a significant amount of negative MACD price divergence built up during the recent run towards the $440.00 resistance level. The divergence extends down towards the $350.00 level and could be reversed if selling pressure persists.
Still, copper has significantly outperformed both gold and silver this year due to demand side story. Should see more chatter about a $3 trillion package and COVID-19 infections dropping through the spring and summer months then coppers stand to benefit.
It should be noted that seasonal patterns are also worth watching extremely closes. Copper demand tends to bottom-out in December, while it starts to peak around late-spring time, which could mean that April and May could be strong months for copper.
The ActivTrader Sentiment Tool is currently showing that 48 percent of traders are bearish towards copper, while 52 percent are bearish. Typically, we need to see a one-way sentiment skew before a major new short-term trend gets going.
Copper Short-term Technical Analysis
Looking at the lower time frames, copper is making lower highs and lower lows, which is pretty bearish which ever you look at things. Copper is vulnerable to decline further while this dynamic remains in play. A break under the $380.00 level should get the next major bear move started.
Notable bearish MACD price divergence has formed during the recent run higher and extends down towards the $355.00 support level. Medium to long-term bulls could be lurking around this area in expectation of significantly higher copper price during the second and third quarter of 2021.
See real-time quotes provided by our partner.
Copper Medium-term Technical Analysis
Looking at the weekly time frame, the larger picture for copper prices still shows an inverted head and shoulders pattern, which remains activated while the price trades above the $380.00 level.
According to the overall size of the bullish reversal pattern, copper prices could rise towards the $600.00 level, making it critical that bulls hold the price above neckline support, around the $380.00 level.
See real-time quotes provided by our partner.
