Copper close to breaking out of rising Wedge
Copper has formed a rising Wedge pattern and is currently testing the lower trend line - and it looks as if it’s breaking out downwards. It does get a bit of support from the 55 daily moving average.
A bearish break out occurs almost 70 percent of the time and this could be now, but it needs to close outside of the pattern to be confirmed.
The target would be the lowest valley in the Wedge, which is at about 340.30. However, the 200 moving average and the 61.8 retracement of the bullish move since November 2012 offers some support.
According to the more conservative measure rule (calculated by Thomas Bulkowski) of a rising Wedge, the target would be about 349, which is also at the 76.4 retracement.
That is also about that level the 200 weekly moving average is at.
If going short at the present level, the correct stop would be the peak at about 377.55. I would, however, choose to stop out if copper jumps back above today’s high at about 374.60. I have indicated on the chart a likely scenario if it closes below the lower trend line. A pullback to test the trend line after break out is common before the next (bigger) bearish move.
RSI is not showing any divergence, but the bullish trend was broken a few days ago and RSI is set to test the 40 threshold. MACD has turned to bearish momentum.
On a weekly chart, RSI was rejected at the 60 threshold but will probably still stay above 40 despite the likely bearish short-term scenario. But because RSI was above 60 in September and has not been below 40 for the long term, sentiment is still bullish.