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In this week's commodity dissector we take a close look at key base metal, copper. Spot price of copper traded on London Metal Exchange (LME) is considered for this analysis. The spot price is quoted in USD/MT (metric tonne). LME copper spot ended at $7440.75 a tonne on Friday.
Long-term view
LME Copper spot found important long-term support in the band between $2,750 and $3,000 in December 2008 and bottomed out. Since then, the long-term trend is up for copper. It decisively breached its key long-term resistances at $8,000 in October 2010 and thereafter at $9,000 in January 2011.
But copper encountered resistance at around $10,000 in February 2011, which is a key psychological level. The metal reversed its direction and has been trending down since then. While declining, it breached its important supports at $9,000 and $8,000.
However, long-term trend remains up as long as it trades above the long-term support band between $6,000 and $6,250. An emphatic fall below this support will pull the commodity down to $5,000 and $5,250 range in the long-term.
Medium-term view
In February 2012, copper met with key resistance at around $8,660. After frequent testing of this resistance, the metal reversed downward and has been on a medium-term downtrend since then. This downtrend remains in place as long as copper traders below the $8,000 level, which is a key resistance level and 50 per cent retracement level of the down-move.
Nevertheless, the commodity is receiving support in the zone between $7,250 and $7,300 and bouncing up. Immediate resistance is at $7,765.
A move above this level can push copper prices higher to $8,000. But a strong breakthrough of $8,000 is needed to reverse the downtrend and take copper higher to $8,500 and then to $8,660 in the medium-term.
Conversely, a strong fall below $7,250 will drag it down to $7,000 and then to $6,700 in the medium-term.
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