Copper in transition
In November 2001 the price of Copper began to rise, followed by an explosion of the prices in the middle of 2005, culminating in an all time high, in may 2006. Since then Copper has been stopped at a resistance level with a temporary pull back in late 2006 and early 2007. But for the last six months or so, the prices have been trying to break through the resistance levels set by the early 2006 price tops. This high is the all time high of the Copper futures contract and therefore an uncharted area. The resistance is such that a breakthrough of that resistance can mean a considerable increase in prices. Another pull-back could, on the other
hand, result in a major price decrease, almost to the half of the price movement of 2001 – 2006, like it did in the last pull-back.
When looking at the charts, the first thing to notice is that the Copper has been moving in a sideways pattern for some time now, both when looking at the daily and monthly charts. This kind of movement, even though it’s quite big, around 18,000 USD pr. Futures contract, will not last for long. All tunnels have the tendency to break and the longer they last, the stronger the move will be out of them. There are only two possibilities when it comes to tunnel breakouts, either it’ll break up or down. But which way, is always a guess.
Even though the direction of the tunnel breakouts are always a guess, we always have some indications to look at. The same goes for the Copper. So where do we start. When looking at the Slow Stochastics (SSTO), we see that the markets are between the 20 and 80 % area. But detailed look at the daily SSTO, we can see that it’s entering the oversold region of the indicator. Which might suggest a bottoming in the near future, around 10 trading days or so. If Copper maintains the same downward movement of the prices, as it has since the last top of the tunnel, it could reach the 50% retracement level of 
the tunnels high an low points. Reaching this point in an oversold region of the SSTO, we could see an reversal of the down movement and a returning bullish sentiment in the market.
When looking at the long term indications in the monthly chart, we se that the SSTO has turned and is now in a upward movement around the 50% area. This indicates a possible upward move of the prices in the long term. Of course the resistance level is a major threshold, but with a strong support, the market could move through.
At the first glance, the Copper might be topping. The resistance has held until now and the daily charts show a tunnelling pattern. All of these are indications of a possible top. But the SSTO indicates that the market is not in a overbought state and therefore less likely to go down. These indications support a upward move in prices.
Then there is the COT or Commitment Of Traders report. The COT gives an indications where the players are positioned. The three groups are Commercials, Large and Small. Commercials being the ones selling or buying the real stuff, the Large being the funds and the Small being the little investors. If we look at the report, the commercials have been large buyers of the product since around the middle of may 2006, or for well over a year now, until the last days of September this year. What we are seeing is that the commercials, or the users have been buying the material and are now beginning to sell it. This tendency in the COT has been evident since the topping of the Copper. Before, during the big surge in the price of Copper, the Commercials have been sellers, not buyers in the market. This formation of the COT could be the strong bullish support the market needs to regain the upward surge of prices.
With this in mind, I believe that we are looking at critical moments in the next 10 to 15 trading days. With the November contract nearing expiration, a new contract could take the Copper to new highs.
