Copper – Flag Formation Points to Dead Cat Bounce

November 30, 2015 Share Print 0

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

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.

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.

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.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

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Craig Erlam

Senior Market Analyst, UK & EMEA at OANDA

Based in London, Craig Erlam joined OANDA in 2015 as a market analyst. With many years of experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while producing macroeconomic commentary. His views have been published in the Financial Times, Reuters, The Telegraph and the International Business Times, and he also appears as a regular guest commentator on the BBC, Bloomberg TV, FOX Business and SKY News. Craig holds a full membership to the Society of Technical Analysts and is recognised as a Certified Financial Technician by the International Federation of Technical Analysts.