With a massive long-term supply deficit bearing down on the copper market it is believed to be in a continuing bull market and this being so, the quite heavy correction from the mid-May highs is viewed as presenting an opportunity to buy copper itself or various copper stocks that have dropped back in sympathy with copper.
On the latest 6-month chart for copper, we can see that the reaction back from the mid-May peak has involved two big downlegs punctuated by a significant countertrend rally, so this correction looks like a 3-wave A-B-C correction.
The second downleg, which is still in force, has resulted in copper becoming quite deeply oversold on both its MACD and RSI indicators, and with the price now entering a zone of quite strong support close to its 200-day moving average, this looks like a good area for it to stabilize before turning higher.
Whilst buyers of copper and copper stocks here would be attempting to "catch a falling knife" inasmuch as it could drop further, the probability of it reversing to the upside soon is improving fast. The best tactic might be to wait until we see a reversal candle, such as a bull hammer or a "dragonfly doji," on the increased volume before buying.
On the positive side, the recent drop in the price of copper will hopefully reduce the number of power outages caused by opportunistic thieves stealing copper transmission cables.
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Clivemaund.com Disclosures
The above represents the opinion and analysis of Mr. Maund, based on data available to him, at the time of writing. Mr. Maund's opinions are his own, and are not a recommendation or an offer to buy or sell securities. As trading and investing in any financial markets may involve serious risk of loss, Mr. Maund recommends that you consult with a qualified investment advisor, one licensed by appropriate regulatory agencies in your legal jurisdiction, and do your own due diligence and research when making any kind of a transaction with financial ramifications. Although a qualified and experienced stock market analyst, Clive Maund is not a Registered Securities Advisor. Therefore Mr. Maund's opinions on the market and stocks cannot be construed as a recommendation or solicitation to buy and sell securities.
