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Copper to Extend Slump by 6.4% on Head-and-Shoulders: Technical Analysis
Aug 9,2011 10:13CST
industry news
Source:SMM
The slump in copper on the London Metal Exchange may not be over, according to technical analysis by Sucden Financial.

Aug. 9 (Bloomberg) –The slump in copper on the London Metal Exchange may not be over, according to technical analysis by Sucden Financial.

Prices that dropped 9.3 percent in the past four sessions to an 11-week low of $8,750 a metric ton yesterday are testing a potential "neckline" in a so-called head-and-shoulders pattern, Brenda Sullivan, a senior market strategist at Sucden, said yesterday in a telephone interview from London. A drop below that line, which connects the lows on Nov. 17 and May 12, could "open targets beginning at $8,219," or a 6.4 percent drop from yesterday's close, within a few weeks, she said.

While prices were up 19 percent from a year earlier, after touching a record $10,190 on Feb. 15, the pattern of the past few months may mean the long-term rally is "under pressure," Sullivan said.

If copper drops below the trend line created by the lows in February 2009 and June 2010, at around $8,685, prices may decline to $8,494 in a few days and "could extend all the way to $7,374 in several weeks or months," she said.

"Copper prices have come down so far that even really long-term support lines are under threat," Sullivan said.

In technical analysis, investors and analysts study charts of trading patterns and prices to predict changes in a security, commodity, currency or index. A head-and-shoulders pattern occurs when a price forms three consecutive peaks or valleys, the middle being the largest.

 

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