Trading copper and copper related shares
Traders will be looking to the rebound of copper off the 5520-support level and wondering whether short term gains are sustainable.
Trading Copper and copper related shares
If you agree with the view that copper is a leading indicator for economic health, then the first part of 2020 might have instilled one with fears of an economic slowdown, as the base metal fell roughly 12% from this year’s highs.
The metal is linked to manufacturing, construction, technology and industrial production. The Corona virus outbreak in mainland China would certainly affect demand for the metal as manufacturing and industrial production in the world’s second largest economy is now expected to be negatively impacted from the epidemic. The Corona virus has essentially more than unwound the positive sentiment stemming from the phase 1 trade agreement being signed with the US.
But while the fatality rate of the Corona virus drops, containment measures gather momentum and Chinese officials inject sizeable amounts of liquidity to boost their economy, we have started to see copper rising off this year’s lows.
Trading the copper price and copper shares
Traders will be looking to the rebound of copper off the 5520-support level and wondering whether short term gains are sustainable. Despite the rebound the stochastic oscillator is suggesting the price of the base metal to still be in oversold territory.
Traders might hope to see a close above resistance at 5805 to suggest that the rebound is set to continue gains. In this scenario the expectation would be for a move towards the next level of resistance considered at 5970. A stop loss would be discretionary, although trailing one at a two-day price low may provide a fairly favourable risk relative to reward assumption.
Alternatively, should the copper price fail to break above the 5805 level, this could be an indication that the rebound has stalled, and that the downside is set to resume. In turn a bearish price reversal before the 5805-resistance level would suggest further downside to come with 5580 and 5520 as the support targets from the move. A close above the 585-resistance level would be a stop loss consideration for the short trade.
Major listed copper producers which will be influenced by movements in the copper price include Freeport-McMoRan, The BHP Group, Xstrata, Rio Tinto, Anglo American Plc and Glencore.
This information has been prepared by IG, a trading name of IG Markets Ltd and IG Markets South Africa Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
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