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Copper ‘Wedge’ Signals Decline to June Low: Technical Analysis

Copper prices, which are heading for a second straight monthly decline, may extend losses and fall at least 4.7 percent by the end of the year after breaking out of a so-called wedge pattern, according to technical analysis by FuturePath Trading LLC.

The attached chart shows March futures have traded below a so-called support line since Nov. 13, when copper fell below the psychologically “important” level of $3.20 a pound, said Paul Kavanaugh, the director of business development at FuturePath. The move signals that prices may drop below the contract low of $3.05 that was reached on June 24, he said.

“We saw a pretty convincing breakout last week,” Kavanaugh said in a telephone interview from Chicago. “The chart is in a convincingly bearish range.”

Copper futures for delivery in March gained 1 percent yesterday to $3.199 on the Comex in New York. The contract has fallen 3.3 percent this month, after sliding 0.7 percent in October.

In technical analysis, investors and analysts study charts of trading patterns and prices to forecast changes in a bond, commodity, currency or index. Support refers to an area where analysts anticipate orders to buy a security. The stronger the support, the more selling pressure is needed to fall below that level.

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