The copper price (COPPER) has performed fantastic lately, much stronger than we anticipated. However, the real test kicks in right now at these price levels. The importance of $2.90 should not be underestimated. The real bull market starts above $3.00, not before.
The weekly copper price chart on 5-years makes our point. Althoug copper broke higher from a falling trend (line) it still has to clear a very important price level, see the dotted line. If copper goes higher from here it has broken out of a fallling trend as well as horizontal long term resistance.
Another way to look at this chart is the upleg pattern. In technical terms it is called an ABCD pattern. The first leg up is the AB leg from $2.40 till $2.80 (approximately). Next is the BC leg which is the correction from $2.80 till $2.45. The next leg higher is CD starts at $2.45. Now this method says that AB equals CD in the best case scenario, so that gives a target price of $2.95. That is exactly where copper stands now.
So both viewpoints confirm each other. The price analysis shows the ultimate resistance point at $2.90 and the technical pattern gives $2.95 as a price target for the ongoing trend.
Articles like this one do add no value at all for investors, at least not in our opinion. Similarly, this article does not tell anything on how to play the copper trend. We feel this analyst has it right though.
How to look at the data points we provided? Our two viewpoints do not imply anything about the next move, they primarily say that the current trend has run its course. Consequently, there is very strong resistance at the current price level. So if (that is a big IF) copper manages to go higher from hear, and break consistently above $3.00, it would mark a mega breakout. In that scenario, we will have the confirmation of a new and strong secular bull market. We would see a very strong rise in a very short period of time, which is what copper has always done in the past.
How to play this potential raging new bull market? A copper ETF like JJC is an option or a copper mining stock like Freeport McMoRan (FCX).
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