Gold Silver Reports — Copper May Enter Corrective Phase — Copper prices have been in a tremendous rally since bottoming out at around Rs.354 in early May, prices have since gained over 27% to reach a high of Rs.451.35 today.
The strong up move was driven by a strengthening Chinese economy and the scrap imports placed by the government which is expected to boost prices in the short term. The first leg of the up move was supported by continuous mine strikes and supply disruptions at major mines.
Technically, Copper continues in an uptrend but momentum indicators have been pushing strongly into overbought territory over the past few weeks pointing towards a strong correction in the immediate term.
Copper is down close to a percent at Rs.444.30 marking its first strong negative close in over a month. A negative close in itself may not be a strong indication of a sell-off but failure to recover from current levels should indicate a saturated buying market and call for strong selling pressure.
RSI has declined sharply from the overbought zone today and is trading at around 38.57 on the hourly charts whereas it continues to remain overbought at 76.60 on the daily charts. The intraday action also indicates that the short term moving averages curve is flattening out which could again indicate a loss of momentum in prices.
Open Interest is also higher by almost 20% in the current contract which might be indicative of a short interest building in the market, on the other hand, such a big jump in positions at its potential peak could also be seen as a warning of an impending top.
In the current week, key levels to watch will be our next support at Rs.440 breaking which we expect prices to touch our price objective at Rs.428 this week and possibly lower. On the upside, resistance continues to remain at Rs.450 and a breakout above this should push prices to new highs in the immediate term. — Neal Bhai Reports