Trade view /
23 August 2017 at 13:53 GMT
Industrial metals have surged higher during the past month with speculation more than real demand being the key driver. Renewed attempts by exchanges in China to curb speculation may help reverse some of the recent strong gains. The combination of record bullish bets and negative divergence puts HG copper at risk of a correction. While the price has been rallying RSI has been falling, a normal sign of slowing momentum (see the short-term chart below).
Hedge funds have been buying copper for the past five weeks with the latest period ending August 15 showing a record net-long of 120,000 lots. This was some 20,000 lots above the previous record from January 31 when prolonged disruptions at the worlds two biggest copper mines raised concerns about supply, something that has not been the driver this time round.
Create your own charts with SaxoTraderGO click here to learn more
Management and risk description
HG copper can be traded both as a CFD and a future, with the choice depending on your risk profile and desired exposure. We apply a relatively tight stop given this trade is going against the prevailing trend, and a continued weakening of the dollar and/or a rally in oil could help lift copper further. We prefer using the December contract as the September contract expires next week.
Parameters (sell either COPPERUSDEC17 or HGZ7)
Entry: sell stop at $2.98 which on the short-term charts signals a break of the neckline on a head-and-shoulders formation.
Stop: 1 ATR (Average True Range) or $0.06 from entry, for example with entry at $2.98 and the stop at $3.04.
Targets: $2.85/lb and $2.77/lb
Time horizon: two to four weeks.
Source: Saxo Bank
— Edited by Michael McKenna
For more on commodities click here.
Non-independent investment research disclaimer applies. Read more
A compiled overview of Trade Views provided on TradingFloor.com is found here