Correction In Copper Or Another Buying Opportunity?

March 5, 2021 11:25 AM


Copper has been one of the most bullish commodities thus far. Copper is tied to manufacturing, which is a good indicator of economic recovery. Although we’re far from our old “norm” as a country and world, Covid-19 vaccines appear to be working as planned and are helping areas reopen. 

The recent run-up in this metal may have hit a wall. Is the shorter-term recovery already priced in? Did prices move higher too fast, too soon? Are longs taking profit with a “wait-and-see” approach? All these questions are extremely relevant, especially after taking a look at the May chart. 

4.375 was touched and the copper market retreated sharply. The technicals are broken and need repair. For now, look at previous day ranges to trade in the short-term as new ranges are made.

Fundamentally, Chinese economic data seems to have slowed. So, in turn, is copper’s demand slowing down already? Warehouse stocks are also turning up greater than expected, another bearish development. 

A stronger dollar will also dictate the direction of copper. Interest rate concerns and long-term plans by the Federal Reserve are all going to play a part in the macro commodity picture, especially for this metal. 

For now, keep an eye on Friday’s move in copper after the U.S. jobs data. The U.S. added 379,000 jobs vs. the estimate of 210,000; in turn, copper moved higher in the morning. A close above 4.15 is needed in the May copper to reaffirm the longer-term bullish feel. If the markets have a weak close heading into the weekend, look for a volatile week to come. 

May Daily Chart

About the Author

Peter Mooses is a commodity broker at RJO Futures. He enjoys the analytical aspects of futures trading and appreciates the economic impact that commodities have across all markets. Peter utilizes market analysis and trends to help clients achieve a balance between risk and return, while always keeping their investment objectives top of mind. Follow Peter on Twitter @PMoosesRJO