Can Copper Flip the Script?

From the Desk of Ian Culley @IanCulley

Everywhere you look, commodities argue a strong case for the next supercycle.  

Live cattle, feeder cattle, sugar, cocoa, and orange juice are all amid historic rallies. Even gold’s resilience in an environment where it should struggle speaks to an underlying demand for raw materials.     

Well, perhaps not everywhere

While orange juice busts loose on a parabolic advance and cocoa rips toward all-time highs, copper futures barely exceed their year-to-date lows.

On the bright side, it stopped falling.

Check out copper digging in at key pivot lows from earlier this spring:

I see a potential double-bottom taking shape.

Yes, it’s still trading below a multi-month downtrend line. Yes, momentum is oscillating within a bearish regime. And yes, copper has plenty of ground to cover on the road to completing a bullish reversal.

Taking a swing at copper down at these levels depends on risk tolerance and trading style.

We can either trade against Monday’s low of 3.52. Or we can buy strength above Tuesday’s closing high of 3.63.

But if capturing the low in copper isn’t your cup of tea, waiting for a violation of the downtrend line and upside resolution above 3.90 also makes sense.

More importantly, a sustained copper bid would support the next commodity supercycle and bode well for global risk assets.

If there was ever a place for copper to turn it around this year, this is it!

Copper futures above Tuesday’s close signal a potential reversal underway.

On the flip side, a break below Monday’s lows leads base metals and global risk assets down a rocky road.

Stay tuned.

COT Heatmap Highlights

  • Commercial hedgers slightly reduced their long exposure in palladium following another record-long position last week.
  • Commercials are within nine percent of their most significant long position for the Canadian dollar in three years
  • And commercials hold a new record-long position for Minneapolis wheat

Click here to download the All Star Charts COT Heatmap.

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