Just What Doctor Copper Ordered: New Price Targets as Futures Break Out
Let's see what kind of targets may lie ahead for the surging commodity.
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Copper futures have been surging higher since March 13 when the marketplace learned that China's top copper smelters agreed on a rare joint production cut. Since the middle of March traders have also focused on increased need for copper resulting from the military tensions around the world and new demands from future data centers.
Let's check out a few charts of the copper futures market to see what kind of targets may lie ahead.
In the daily bar chart of the futures continuation data (linking up of a number of contracts), below, I can see a consolidation pattern from May to February. Prices traded around the 50-day and 200-day moving average lines until March when prices broke out to the upside. Copper futures now trade above rising 50-day and the rising 200-day moving average lines.
The trading volume has been increasing the past 12 months due to increased hedging activity and speculative trading. The On-Balance-Volume (OBV) line shows strength from early February. The Moving Average Convergence Divergence (MACD) oscillator is in a bullish alignment above the zero line.
In the weekly Japanese candlestick chart of the copper continuation futures, below, I went back five years. The shares have turned higher in recent weeks to breakout over the high of 2023. Traders are setting their sights on the highs of 2022 in the $5.00 per pound area.
The indicators support further gains with increasing volume, a rising OBV line and a bullish MACD oscillator.
In this daily Point and Figure chart of copper futures, below, I can see that prices have reached and exceeded a target in the $4.13 area.
In this weekly Point and Figure chart of copper futures, below, I used a five-box reversal filter, which suggests a price target in the $6.34 area.
Bottom-line strategy: Most of the time commodities rallies start from supply shocks. Today we have copper futures rallying due to a supply shock and new demand. Prices will be rationing copper supplies. Traders should stay long Southern Copper Corp. SCCO and Freeport McMoRan FCX.
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