Copper May Decline to $9,000 on Sell Signal: Technical Analysis

Copper will probably drop to around $9,000 a metric ton before resuming its advance to a record, said Wang Yaoyao, a technical analyst at Huawen Futures Co.

Tom DeMark’s Sequential and Combo indicators, designed to identify tops and bottoms and anticipate reversals, both give sell signals on copper for three-month delivery on the London Metal Exchange, Shanghai-based Wang said in a phone interview.

The metal used in cable and wiring climbed to a record $9,781 a ton on Jan. 19 on expectation that global demand led by China will outstrip supply, and traded at $9,478.50 a ton today. The commodity advanced 30 percent last year, the third-best performer of the six base metals traded on the bourse.

"The pattern shows it’s time to go short," said Wang. "Looking at the daily and weekly charts, TD Combo and Sequential both showed the market topped last week. This doesn’t happen often, and is a strong alert for correction."

The TD Sequential, which seeks to anticipate "trend exhaustion," and the TD Combo indicator, which traces a security’s price movements, had shown a so-called 13 count countdown, said Wang. The pattern signals copper may decline to test support at $9,070 a ton, and may slide to $8,470 a ton if that level doesn’t hold, she said.

Huawen Futures, a member of the Shanghai Futures Exchange, the Dalian Commodity Exchange and Zhengzhou Commodity Exchange, provides brokerage for metals and agriculture futures.

Technical analysts observe price charts to forecast resistance levels, or ceilings restricting price increases, and support levels, or floors limiting declines. The trading patterns and prices are used to predict changes in a security, commodity, currency or index.