Although copper prices have more than tripled since the end of 2008, the $3.97 area has been a reliable weekly closing pivot going all the way back to 2006. After failing to settle above $3.97 in March 2008 — the peak of a five-rally ending in May 2006 — this area has acted as both support and resistance on a weekly basis. Front-month copper can be very volatile and trade well through the weekly closing pivots and still settle back below them. But, using the weekly closing chart can be useful in putting you on the “right side of the trade.”
For now, it looks like selling the rallies until we get a weekly close above the pivot, or at least unwinding some longs near this level, is prudent. We can use the weekly chart as a starting point for our technical analysis and then look at daily Fibonacci levels for inflection points and moving averages for a shorter time trading view. The $3.72 level has been a daily closing pivot in the May futures contract, and $3.705 in the rolling front-month contract. A break of $3.70 likely would open up momentum to test the .618 retracement at $3.53.
David Wienke runs Triquetra Resources Ltd. in Riverside, Ill. (www.triquetraresources.com).