Copper – Flag Formation Points to Dead Cat Bounce

After declining for six weeks in a row, copper prices stabilised last week having found support around $2 per pound, a key psychological level.

Copper Weekly

At the moment it’s unclear whether this new found stability marks a bottoming in copper or just a brief period of respite, but the early signals suggest it may be the latter.

Copper Daily

Firstly it ran into resistance today around $2.11, a previous level of support, and has failed to gather any upside momentum since. This suggests there isn’t much bullish appetite, even at these low levels and makes this look more like a dead cat bounce than a broader reversal.

Copper 4hr

Supporting this is the flag that appears to be forming on the 4-hour chart. A flag is typically a continuation pattern and can form as a result of profit taking at a key level, which appears to be what we’re seeing now.

If this is the case, once we see some consolidation and it rises back to an attractive level, we could see selling resume. The break of the flag support would indicate that this has occurred. In the meantime, it could continue to consolidate for a little longer.

Craig Erlam
Based in London, England, Craig Erlam joined OANDA in 2015 as a Market Analyst. With more than five years' experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while conducting macroeconomic commentary. He has been published by The Financial Times, Reuters, the BBC and The Telegraph, and he also appears regularly as a guest commentator on Bloomberg TV, CNBC, FOX Business and BNN. Craig holds a full membership to the Society of Technical Analysts and he is recognized as a Certified Financial Technician by the International Federation of Technical Analysts.