Some charting evidence of a pending top exists in Copper.
This evidence includes the likely build up of a large volume of sell stops just below the market. The weekly chart shows that the rally from the October 2011 low has simply retested the double top completed last September. My macro friends tell me that demand for Copper in China is on the wane — and China has been the world’s biggest driver of Copper prices in recent years.
Also note on the weekly chart the possibility of a 29-month H&S top pattern. We are a long way from having this pattern come into play, but if prices start down keep it in the back of your mind. But, remember, I am NOT a big fan of up-slanted necklines on H&S tops.
The daily chart displays a clearly defined 2-month symmetrical triangle. Because this triangle has five contact points it can serve as a top pattern — pending a close below the existing March low. There are no doubt stops gallore below the February and March lows. Markets — almost magically — are drawn to important chart points. These stops could result in follow through, which could possibly put a top in the market for 2012. Thus…Copper, stopper, build a topper.
Even if a downside penetration is not made, this pattern could still prove to be bearish. Over the years I have noticed that the upside completion of a 6-point triangle with three distinct highs and three distinct lows is the last gasp of a bull trend. This is NOT true for four-point triangles, which tend to thrust prices considerably higher.
Thus, should prices move out of the top of this pattern and suddenly reverse back into the pattern it would be a significant sell signal. The failure of patterns to result in an expected move often times has great technical significance. The critics of classical charting principles fail to grasp this nuanced concept.
Markets: $HG_F, $JJC