Copper ‘Pennant’ Breakout May Signal a Rally: Technical Analysis

Copper futures broke through a so-called pennant formation and may signal a rally to the highest price since February, according to technical analysis by Frank Cholly, a senior commodity broker at RJO Futures.

The attached chart shows a trading range since Oct. 8 that formed a “pennant flag” when the upper and lower trend lines met to form a triangle, before prices broke through yesterday. With the lower band at $3.215 a pound and the upper at $3.329, a few closes above the 200-day moving average of $3.3493 would confirm the bullish move and may send copper to $3.60, the highest since Feb. 28, Cholly said.

“If we can get a couple closes above the 200-day average, the market can start to muscle through and break out of the range we’ve been in,” Cholly said in a telephone interview from Chicago. “I like the way the chart is shaping up, and higher seems to be the path of least resistance right now.’

Copper futures for December delivery closed yesterday $3.3355 on the Comex in New York, after touching $3.355, the highest for a most-active contract since Sept. 20. Prices will need to close above a range of $3.35 to $3.37 for a few days to confirm the breakout, and may meet ‘‘resistance,’’ or an increase in sell orders, at about $3.40, Cholly said.

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

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