Three very sexy price charts

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Copper bear market continues to unfold

Silver is also setting up for a sell signal.

I last commented on Copper in a June 1 post titled, “Major chart top in Copper – Target is 360.” The bear flag identified in that post appears poised for completion. A move and close below the June 2 low of 403.25 (July contract) would put the finishing touches on the red metal. The chart below is a closing price chart — the close-only flag would be completed today by a close below 408. Such a close would have initial targets of the May 12 low at 385.35 and the November low at 360 to 365. The diamond top projects to 363.

In my opinion, if Copper has really rolled over (if the bull trend from the December 2008 low has run its course), the most likely target for a bear thrust on the weekly chart is the 2010 low at around 276. The bull trendline on the weekly log chart has been penetrated. Keep in mind that the violation of a trendline is not a signal in my trading, but simply indicates a change in a market’s behavior.

Selling Copper on weakness has not been a profitable manuever. If the flag is confirmed, Copper should be shorted on 700 to 800 point rallies.

A postnote on Silver. This market is setup to signal a H&S failure. I will short Silver if the June 3 low at 3506 is penetrated, risking about 50 basis points.


Major chart top in Copper — target is 350

Bear flag retest of diamond top is turning down

Two chart observations are worthy of note on the nearby daily futures graph. First, the decline in early May completed a 4+ month diamond top. This is a major reversal pattern. Second, the rally from the May 12 low is tracing out a bear flag. The decline today may indicate that the May 31 high will be the high of the flag.

The weekly chart of JJC, the Copper ETF, shows that the dominant trendline from the late 2008 bottom has been violated. Keep in mind, the violation of a bull trendline is not, in and of itself, a bearish signal. It does recognize that a trend change is in the process of developing.