SINGAPORE: LME copper may break a support at $6,633 per tonne and fall towards a range of $5,833-$6,191 in three months, as suggested by its wave pattern and a Fibonacci ratio analysis.
The support is identified as the 23.6 percent retracement of a corrective wave cycle from the Jan. 11, 2016 low of $4,318. The cycle consists of three big waves.
The first wave labeled A ended at the Feb. 13, 2017 high of $6,204. It has a complex structure and can be divided into many smaller waves. Despite its complexity, it shows a corrective wave characteristic.
This characteristic is important in interpreting the behavior of the metal around the Dec. 28, 2017 high of $7,312.50.
Copper started a deep correction from this high. It dropped sharply again from a similar level at $7,348, the June 7 high. These two highs strongly suggest the formation of a double-top.
Wave pattern confirms the completion of a failed fifth wave at $7,348, which is labeled 5. Both the double-top and the wave pattern signal a reversal of the uptrend from $4,318.
There is little doubt that copper could fall into $5,833-$6,191 range. However, it may first seek a support in a narrow zone of $6,532-$6,633, bounce towards $6,906, and then resume its downtrend, as the fall from $7,348 looks too steep to sustain.
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** Wang Tao is a Reuters market analyst for commodities and energy technicals. The views expressed are his own.
No information in this analysis should be considered as being business, financial or legal advice. Each reader should consult his or her own professional or other advisers for business, financial or legal advice regarding the products mentioned in the analyses.
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