Mapping the Market: Copper could be gearing up for a rally

By Christopher Romano Sept 23 (Reuters) -

Copper prices may be preparing for a significant ​rally, with gains of nearly 14% possible if ​the metal can clear a key hurdle, ‌technical analysis ​indicates. Click here for a detailed technical analysis chart.

The bullish case starts with what chart watchers call a "false break." Earlier this month, copper slipped below ‌a trend line drawn from the low it hit back in March. Trendlines link a series of previous highs or lows, and when prices break through one, it's typically read as a signal of where the market is ‌headed next.

But copper didn't stay down for long — it climbed back above that trend line just three ‌days later, and reversals like this are generally seen as a positive sign for prices. That snap-back reinforced a broader pattern: copper has been consolidating, or trading in a fairly narrow range, since climbing off a low near $5.93 hit on June 24.

That range has run ⁠roughly between $6.30 ​and $6.89. If copper can push ⁠decisively above resistance near $6.89 — the high reached on September 9, according to data supplied by LSEG — it could target a further gain ⁠of roughly $0.96, using a method called a "measured move" that sizes up potential gains based on the rally that preceded the consolidation.

Momentum ​indicators followed by market participants are adding to the optimism. The Relative Strength Index is rising without flashing ⁠overbought warnings, and the MACD indicator is also giving positive signals. Still, the bullish outlook would fall apart if copper drops below support ⁠near $6.30, ​the floor of its recent trading range.

What the chart shows: (Mapping the Market is a daily column written by Reuters journalists. The commentary is based on ⁠a technical analysis of financial ⁠charts, which helps assess the likelihood of future price moves but does not guarantee the outcome. The column does not constitute investment advice or trading recommendations. )

(Christopher Romano ‌is a Reuters ‌market analyst. The views expressed are his own; Editing by ​Burton Frierson and Jonathan Spicer )