In my previous Copper update in September, I proposed readers to cover shorts in Copper ($2.32 level) and to watch Crude Oil for further clues as the “black gold” rocketed for a worrisome $10 in 3 days while Copper was quietly sleeping, unaware in its sideways “bed”. Indeed, the metal started to elevate with a two-day gap following Crude Oil, confirming that the signal was valid, and Copper reached $2.5.
Crude Oil Daily Chart: Bears Have Attacked and Bulls At Halfway
Chart courtesy of TradingView.com
Let’s start from the leading instrument’s chart above. Last time, I assumed that Crude oil should have reverse down ahead of the downtrend touching a point at $53 and it reversed earlier than I expected – just below $51. This was due to huge selling pressure in the market.
So, the “black gold” gained back more than $13 or $13000 for each standard contract, a nice gain for contrarian traders. But, it was a time-consuming, nervous game as you can see the correction (highlighted in pink rectangle) has been split into two separate upside moves. The first one was quick and bold and the only one worth being traded. Then we see a very long correction preceding the last jump up which turned to be pale compared to the first attack as it didn't even reach the length of it.
That has given sellers a strong signal to sell and the price couldn’t advance beyond the 50% retracement level after three attempts. Crude quickly lost $3 in two days, and I think it is only the beginning of a crash that could accelerate below the $44 per barrel level. The minimum target I see is the recent low at the $37.7 level which could be reached by mid November, and this would drag Copper down.
Copper-Crude Oil Comparative Chart: Another Evidence That Copper Is Driven
Chart courtesy of TradingView.com
The chart above shows us that the leader is Crude Oil, it started the recent swings first, and Copper has followed. The reversal up at the end of September that is highlighted in a blue vertical dashed line is the first proof. Copper has made another lower low while Crude Oil has already bottomed and reversed. The green vertical dashed line points at the nearest past. Last week Crude Oil had peaked and reversed down on Friday while Copper peaked at $2.44 on Monday and Tuesday we saw a lower price level showing the gap of the reaction.
I have already written the minimum downside target for Crude at $37.7. If Copper catches up to the same level, proportionally we can benefit from a hefty 21% of profit if we cover short Copper at the $1.9 level. Let’s see how the $37.7 level will react once reached as oil glut, Iran deal (sealed) and China troubles can easily break it without a stop as those reasons are factual and forecast only to worsen more.
Intelligent trades!
Aibek Burabayev
INO.com Contributor, Metals
Disclosure: This contributor has no positions in any stocks mentioned in this article. This article is the opinion of the contributor themselves. The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. This contributor is not receiving compensation (other than from INO.com) for their opinion.
