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Technical Analysis #C-COPPER : 2016-07-01

Copper recovery continues

Copper has been trading with positive bias since the beginning of 2016. Recent data indicate infrastructure investments rose in China in the first five months of 2016, with GDP growth expected to edge higher in Q2. Will the copper continue advancing?

Chinese government is expanding government spending on infrastructure projects to support growth in order to attain its 6.5-6.7 percent annual growth target. China’s infrastructure investment in January-May of 2016 grew 19.8% year-on-year, faster than the 17.3% rate in 2015. Infrastructure investment accelerated as investment by state owned enterprises jumped 23.3%. Robust growth of the second largest economy in the world is a major source of support for commodities and copper particularly. Today official Manufacturing PMI and Caixin Manufacturing PMI for June came out in line with expectations. According to China’s National Bureau of Statistics the manufacturing activity was steady in June with Manufacturing PMI at 50.0, the threshold level between expansion and contraction, while Caixin Manufacturing PMI declined to 48.6 from 49.2, indicating further contraction in manufacturing sector in June. The readings were bearish for copper. China’s second quarter GDP will come out on July 15, the GDP growth is forecast to rise to 1.2% quarter on quarter compared with the Q1 growth of 1.1%.

COPPER

COPPER:D1 has been trading with a positive bias in the daily timeframe since the beginning of this year recording a 5.7% gain year-to-date after a 23.85% loss in 2015. It rebounded following the Brexit decline, staying above the 50-day moving average. The price has approached the 200-day moving average MA(200). The Parabolic indicator has formed a buy signal. The Donchian channel is tilted upward, indicating uptrend. The MACD indicator is above the signal line and the gap is rising, which is a bullish signal. The RSI oscillator is edging down toward the middle level which is a bearish signal. We believe the bullish momentum will continue after the price closes above theMA(200) and upper Donchian boundary at 2.1945. A pending order to buy can be placed above that level. The stop loss can be placed below the last fractal low at 2.0674. After placing the pending order, the stop loss is to be moved every day to the next fractal low, following Parabolic signals. Thus, we are changing the probable profit/loss ratio to the breakeven point. The most risk-averse traders may switch to the 4-hour chart after the trade and place there a stop-loss moving it in the direction of the trade. If the price meets the stop loss level (2.0674) without reaching the order (2.1945), we recommend cancelling the position: the market sustains internal changes which were not taken into account.

Position Buy
Buy stop above 2.1945
Stop loss below 2.0674


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