Traders love to give nicknames to markets.
In the currency world, the Canadian dollar is known as the “loonie” because of the image of a loon on the Canadian $1 coin…
Safe, established companies in the stock market are “blue chips.”
And in the market I’ll be walking you through today, copper is known as “Doctor Copper.”
Traders have assigned this nickname to the reddish metal because it’s a leading indicator for the health of the global economy.
Copper is used in everything from electrical cabling, plumbing, and industrial machinery. So if the price of copper goes up, then that suggests the demand for raw manufacturing materials is rising.
And this signals that businesses are eager to expand their operations and hire more staff.
On the other hand, declining prices could signal an economic slowdown as businesses weigh recessionary risks.
Recently, I’ve spotted an exciting bullish setup in copper. Take a look at the price chart below…
First, notice the two moving averages (MAs) on the chart – the 50-period MA (red line) and the 200-period MA (green line).
The 200-period MA is a long-term trend indicator. Back in January, copper broke above the 200-period MA and has managed to stay above it ever since. This is a great sign that the trend in copper could be shifting to the upside.
The 50-period MA is my intermediate-term trend indicator of choice. And right now, copper is trying to break above the 50-period MA as well.
If it can do that, then there should be a burst of bullish energy to take copper higher towards my upside target of $4.55.
Next, notice the bull flag (blue lines) on the chart. This is a bullish chart pattern that suggests prices will break out to the upside.
The pattern looks very close to completing. All that’s required now is for copper to break through and close above the upper line of the flag.
When multiple pieces of technical analysis all come together, there’s usually a great trading opportunity at hand. And copper’s chart is a great example of this.
The $4.55 upside target (purple line) is a significant price level. If copper reverses after meeting this target and breaks back below the 200 MA, then the global economy could be in for more pain.
But if copper can hold above $4.55, then that would be a great sign that Doctor Copper is ready to cure the global economy. We could see renewed demand for raw materials and manufacturing around the world.
Happy trading,
Imre Gams
Analyst, Market Minute
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Source: Jeff Clark Trader