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Copper Price action – Sharp Breakout and the possibility of Retracement

Copper prices rallied sharply from the beginning of June. International Spot prices jumped from 3.07 to 3.30, just in a matter of less than two weeks. It all started with the breakout on June 4th and unfolded into a sharp rally. It’s a typical market behavior to retrace or at least have a minor correction, after an extended upside or downside price moves. As I pointed out before in the article on impulsive movements, that’s the logic at work here. Hence there’s an increased chance of retracement in copper prices.

Copper Price Action Analysis – Breakout and Sharp Rally

Price Action shows possibility of Retracement due to breakout

Strong Economic outlook and gradually strengthening Global demand is the fundamental reasons for the rally. Copper prices were struck in sideways market for almost 2 – 3 months; we can see this clearly on 4h and 5h charts. The market structure is also similar to what Professional traders refer as “Mean Reversion” – A specific stage in the commodity market cycle where smart money players either accumulate or liquidate the positions. Similar to Richard wyckoff’s accumulation – distribution phase.

Strong demand prospects combined with supply side disruptions led to the upside Breakout from resistance zone 3.123 – 3.125. Momentum (as measure by MACD), made a new high pointing out the bullish strength. Then copper prices rallied sharply from 3.07 to 3.30.

From Price action perspective, it’s actually an Impulsive movement. Most of the experienced traders know that, followed by an Impulsive movement price action can either retrace or correct. We can expect the same tendency to happen in Copper. Traders should watch the Price action in coming days, instead of initiating trades at market highs it’s better to wait for a retracement and then take trades according to market sentiment.


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About the Author:

Balaji is a Speculator, Investor and Trader (All in All!!!) and self published author. Trading in the Markets since decade, have seen more ups and downs along with institutional trader's lifestyle. He usually trades Nifty, Bank Nifty, Commodities, Futures cum Options around both Indian and global Markets. Balaji applies highly analytical and systematic Price Action strategies He blogs passionately about Trading strategies, Price Action Trading, Technical analysis, Macro events, Market setups, Financial and Economical topics. Apart from Trading and Blogging, Balaji also mentors aspiring Traders and Investors on becoming successful in highly competitive financial Markets.

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