Copper Below March Low Signaling More Losses: Technical Analysis

Copper futures that posted their biggest first-quarter decline in more than a decade are headed lower this month, according to technical analysis by Paul Kavanaugh at FuturePath Trading LLC.

The attached chart shows the contract for May delivery on the Comex in New York closed at $3.3745 a pound yesterday, below the intraday low on March 19 of $3.388, the lowest for a most-active contract since August. That suggests the price will drop within a few weeks to $3.31, the lowest price for the May contract last year, Kavanaugh said.

“Failure to hold above the March 19 low is an important indicator, and the candlestick chart is showing a pretty clean ‘sell’ signal,” Kavanaugh, the Chicago-based director of business development, said in a telephone interview. “I don’t see any evidence that the market has found buyers.”

A drop to $3.31 would mark the lowest price for a most-active contract since Aug. 3, after the metal tumbled 6.9 percent in the first quarter, the biggest drop during that three-month period since 2001.

“Anyone who bought since September is losing money now, and that should continue to pressure prices lower,” Kavanaugh said. “I would not look for this cat to bounce yet.”

In technical analysis, investors and analysts study charts of trading patterns and prices to forecast changes in a security, commodity, currency or index.

Before it's here, it's on the Bloomberg Terminal.