We published a buy signal in the copper futures on March 25th right here at Equities.com while the market was still below $3 per pound. We found that the market’s penetration of this key price level was actively bought by the commercial traders we follow in our own analysis. The current situation implies that the commercial trader category is not completely sold on the strength of this bounce. Their resulting sales have shifted their momentum from positive to negative for the first time since early February.
The commercial traders could be looking at a slowing China, US home sales or trouble in Ukraine. Thanks to the Commodity Futures Trading Commission (CFTC)’s Commitment of Traders Report, we don’t have to concern ourselves with why they’re turning negative. We can quantitatively track their collective buying and selling and use this as a proxy for the cumulative sum of their best market projections. The current setup, including the commercial traders’ actions can be seen on this chart. This shows that the copper futures rally has begun to stall as evidenced by narrower range days following last week’s breakout. Yesterday’s high of $3.1045 is nearly halfway back from the February highs to the April lows.
This morning’s action would be negative enough to for us to issue an official COT Sell Signal if we were to close near here ($3.0790) or, lower. That said our protective buy stop would be placed just above yesterday’s high. Minimizing risk has always been the key to successful trading. We’ll continue to side with the big money and allow them to pave the way.
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