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Weekly Technicals on Metals Part A: Copper, Aluminium and Nickel

Published 03/02/2021, 08:25
Updated 09/07/2023, 11:32

Copper

LME Copper (3 Month Continuous)

I have repeated this for a while now, how ‘...once again...the market had seemingly baulked at entering the previously highlighted Congestion formed back in February 2013 between 8200—8350...though it is within the wider Congestion from September and October 2012 between 8100—8350.’. The wider 8100—8350 Congestion Band started to erode the rise four weeks ago when the market entered the Band. This attrition has been gradual and nagging as we’ve had and continued to have this past week a number of contradictory Bullish and Bearish Patterns one after another. This led me to hypothesise that the such Patterns were a sign of Indecision...but on a grander scale than just the occasional day or two.

Overall, the last three and a bit weeks have seen a gradual pressure lower from the overhead Congestion. This has led to a new January based Downtrend (currently 7969), a two...possibly a three pointer...and the idea we may have a new Pattern developing...but more on that later. Firstly, I’d like to draw your attention to some support we have below that I highlighted last week. ‘Looking around, below we have a new Congestion Zone established at the end of December 2020 and centred around 7820. Meanwhile below the 7820 area we have a further small Congestion Zone around 7720—7675.

However, after that there seems to be little until the combination of the very recent 50% Fib at 7450, the rising Short/Medium MA (currently 7754) and a...still influential October 2020-to-date Uptrend (currently 7717).’. As you can see from the Daily Chart, the market has come down and the support has risen. Last Thursday the market dipped down all the way through the 7820 Area and stopped dead at the Short/Medium MA, before turning up to close back up at 7904, well over the 7820 area. Since then the market has tried repeatedly to punch down through the 7820 area but with limited results.

There has been no clean close below the 7820 area, yesterday the close was at 7822 and the Daily Pattern was an Indecisive Spinning Top. Today so far the market has punched lower again and has managed to push down through the Short/Medium MA and so far halt at the October 2020-to-date Uptrend.

This is a crucial time for the market as we additionally have the opportunity to perhaps have a new overall Pattern as well. If you look at the December2020-to-date action, it looks like we may have a rare Roof Pattern, sometimes known as a Half Diamond Pattern. Now this Pattern is as I’ve already mentioned—rare! It’s performance also is not that good and it can break both upward and downwards. Nevertheless, the base is on the 7700, possibly the 7735 area...and the downward slope is on the previously mentioned Downtrend. Two things I should point out. Firstly, once we have a confirmed break, then the size of the move will be about 325.00 in the direction of the break. Secondly, I may be mistaking the roof Pattern for a Complex H+S Pattern. Only time will tell on that one, so watch carefully.

Aluminium

LME Aluminium (3 Month Continuous)

This continues to be quite an interesting Daily Chart! Last week I mentioned that ‘The key recent event was continued formation of a possible second Shoulder in a lopsided very late November 2020-to-date H+S Top as well as a breach below the Neckline (currently 1959) made last week (two weeks ago now). This breach did not close below the Neckline and indeed made almost a Bullish Dragonfly Doji Pattern.’.

The subsequent move higher petered out over the lesser Fib at 2010 but I suspect the Short/Medium MA (currently 2008) may have also had a significant hand in that. The market then moved lower but it was fraught with some unhelpful Patterns to the Bears, an Indecisive Spinning Top for example. However, by yesterday the market had once again made contact with the Neckline , which is about to coincide with the big old 38.2% Fib of the 2011—2016 move at 1957.

Today the market dipped lower, the lowest we’ve been since mid November 2020, piercing the Neckline and coming very, very close to the May 2020-to-date Uptrend (currently 1949). Now last week, I wrote the following on the overall picture ‘Overall, we have a full developed, if not prettily proportioned, H+S Top that apart from one session last week, has not asserted its Bearishness onto the market. Typically, one would look to target) ‘X’ at about 1885 as a first possible target for the Pattern, being the height of the second Shoulder extrapolated lower from the Neckline. There would subsequently be a possible pullback up to the Neckline before a fresh attempt further at the full {{0|Target}) ‘X1’ on the downside in the 1864 area.

None of this has happened as yet and the opposite may be true in that we may have a rare H+S Continuation Pattern. If that is the case - and it is far from certain - then we could be looking up towards the 2220 area’. That all still bears true. However, we may have another Pattern developing which I have labelled on the Daily Chart, a possible Descending...sometimes called a Falling...Wedge Pattern. The Lower Wedge Trendline is the Neckline for this but the Upper Wedge Trendline has a choice of two, both Downtrends!

The shorter 2020 Downtrend (currently 2010) or the slightly longer mid December-to-date Downtrend (currently 2038). This is where the numbers get complex. We’re not out of the purported Wedges as yet, so no Targets but I can give ideas on the size of the move once we do. Topside for the larger Wedge would be about +70, the smaller Wedge about +60. Downside for the larger Wedge would be about –35 and the smaller Wedge about –30. The number are so small and so close together because that is what they are, small Wedges that are close together. We have still some possible weeks to go on these Patterns, especially on the larger one. The question going forward is where we have a Wedge...of a H+S Pattern?

Nickel

LME Nickel (3 Month Continuous)

I wrote three weeks ago ‘I drew a Bullish Andrews Pitchfork back in October 2020 based on the action from late July—very early October 2020. Here we are, well into 2021 - and into January 2021 specifically - and I still see the Bullish incentive carved out in this same Bullish AP. It has been finessed since the start, pointedly a smaller early October—early November 2020 Bullish Schiff Pitchfork has been added since last time. This Pitchfork takes into account the easing of the original stronger Bullish AP showing the Bullish angle of attack by bringing in the dips below the original Lower Tine (currently 17995) into the current market.

You see, the Lower Tine of the Bullish SP (currently 17285) is simultaneous with the early October-to-date Uptrend, and more importantly, they are a three pointer! So whilst the original Bullish AP may be eroding with moves lower, the newer Bullish SP has taken up the slack and has continued the Bullish angle of attack. With this in mind, let’s look at the other Tines involved that are nearby. The Middle Tine of the SP (currently 18075), the Upper Tine of the SP (currently 18860) and the Middle Tine of the Bullish AP (currently 19380). I’d also add the resistance at 17815 from the October 2019 high and in the distance, the Congestion from August 2014 between about 18400—19070.

Overall, this market continues to move higher with both Pitchforks...which is amazing considering how long they have been in operation.’. As I wrote last week, all this is still true! This past week we’ve seen the market confirm the validity of the overhead ‘Congestion from August 2014 between about 18400—19070.’ as prices have after two weeks of trying, failed to really make a dent up there and have dropped down all the way through the Middle Tine of the Bullish SP and the big, previously broken, Lower Tine of the Bullish AP.

Last Friday showed a seeing continuation lower with a Key Reversal Down. However, the market about faced yesterday but got caught in the Tine Congestion immediately overhead. This has resulted in the recent move lower, though very, very cautiously. The key levels below are now the combined three pointer Uptrend and Lower Tine of the Bullish SP along with their close companion, the rising Short/Medium MA (currently 17125)

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