Catch Copper on the Breakout

From the Desk of Ian Culley @IanCulley

Gold is up for the sixth day in a row – and it looks like this week’s breakout might be the real deal.

If it is — and gold continues to rip — it’s only a matter of time before copper breaks out too.

Check out the overlay chart of gold and copper futures:

Where gold goes, copper follows. Or perhaps they simply enjoy similar paths.

The rhyme or reason makes no difference. During a commodity bull run, precious and industrial metals will enter a broad markup phase. Gold will not take off on a rip-roaring rally without copper by its side.

I placed a question mark above copper’s former resistance level, marked by the 2011 and 2022 highs. To be clear, the annotation poses the question of when — not if – copper will resolve higher.

But before Dr. Copper can break the psychological barrier of five dollars, it must cut loose above four.

It’s getting close…

Copper futures are carving out a multi-month base as buyers chip away at overhead supply.

An eight-week inverted head-and-shoulders pattern is forming just below the breakout level. I expect this pattern to act as a launch pad, sending price to fresh 100-day highs while completing the larger basing formation.

But first, copper must print a daily close above 3.96.

The bearish-to-bullish momentum reversal adds to my conviction of an eventual upside resolution. But we trade price, not the 14-day RSI.

If you’re a trend follower, you know the drill: get long on the breakout and let it ride.

For you position or swing traders out there, a more tactical upside target stands at approximately 4.25 with a secondary objective at 4.85 (a shelf of former highs from 2022).

I like to think of a commodity bull market as a long winding road that can stretch for more than a decade. The twists and turns follow explosive rallies and dramatic declines, offering stellar trading opportunities along the way.

If you missed gold before it hit the road this week, copper is revving its engine. Both promise a wild ride.

Is gold going to 5K and copper to 8 bucks?

Or am I a crazy commodity trader who looks at too many cocoa charts?

– Ian

COT Heatmap Highlights

• Commercial hedgers posted another record-long position in soybeans.
• Commercials upped their long exposure to the Swiss franc, edging within six percent of their largest position in three years. 
• Commercial net-long positioning reached a new three-year extreme in soybean oil. 

Click here to download the All Star Charts COT Heatmap.