Copper prices declined to test the 61.8% retracement of the advance from the mid November low in today’s trading, but managed to reverse from that retracement level and ended the session with a gain. The contract for March 2017 settlement on the COMEX division of the New York Mercantile Exchange settled the day at $2.6330, up 0.88%.
Today’s upside reversal, or lower-low/higher-close, implies the recent setback in copper prices may have run its course. Follow through on today’s recovery rally would provide more solid confirmation, as would a reported increase in open interest for today’s move to the upside. Such developments would imply the next move for copper prices is a return to the November highs, with the potential for an upside breakout.
A failure to follow through on today’s higher close would be a negative development that calls into question the bullish implications of today’s upside reversal. On the downside, first support is now at today’s $2.5505 low. Given that this low corresponds to a 61.8% retracement of the advance from the mid November low, a break below this level would increase the potential for a return to that low, at the $2.4350 level.
This represents an important of level of support for the March contract, as a close below would confirm the formation of a double top reversal pattern, calling for lower copper prices in the weeks ahead.
Should the copper prices follow through to the upside and clear the November highs, the target would become the May 2015 rally peak at $2.9465, the next level of resistance on the weekly chart.