Best of the Week
Most Popular
1.UK House Prices BrExit Crash NOT Likely Despite London Property Market Weakness - Nadeem_Walayat
2.BrExit Morning - New Dawn for Britain, Independence Day! - Nadeem_Walayat
3.LEAVE Wins EU Referendum - Sterling and FTSE Hit Hard, Pollsters, Bookies and Markets All WRONG! - Nadeem_Walayat
4.BrExit Implications for UK Stock Market, Sterling GBP, House Prices and UK Politics... - Nadeem_Walayat
5.Trading BrExit - Stocks, Bonds, Sterling, Opinion Polls, Bookmaker Odds and My Forecast - Nadeem_Walayat
6.FTSE and Sterling Brexit Trading, Deconstruction of the EU Referendum Result - Nadeem_Walayat
7.UK Interest Rate Cut to 0.25% Imminent and More QE Money Printing - Nadeem_Walayat
8.Trading BrExit - British Pound Plunges, FTSE Stock Futures Slump on LEAVE Shock Referendum Win - Nadeem_Walayat
9.The Stock Market is Reading it Wrong! - Chris_Vermeulen
10.Breakouts Galore in Gold and Silver - Jordan_Roy_Byrne
Free Silver
Last 7 days
Bitcoin $650 Still in Play - 26th July 16
Deutche Bank Stock Price Crash - The EU Has Problems Far Beyond the Brexit - 26th July 16
The Forex Markets Are Getting Exciting! - 26th July 16
Underpriced Silver Is the “Rip Van Winkle” Metal - 25th July 16
Declines in Multiple Market Indexes - 25th July 16
Retailers Are Doomed as Most Americans Are Too Poor to Shop - 25th July 16
Here’s One Currency That Could Go to Zero - 25th July 16
Stock Market Top is Expanding - 25th July 16
Silver Manipulation – Because They Needed the Eggs - 25th July 16
Silver Market COT Stuns: What's Going On Here? - 24th July 16
Gold Demand Remains Stable During Sector Weakness - 24th July 16
Sernova, Diabetes and Haemophilia - 24th July 16
Russia: Tensions, Turmoil, and Western Hubris - 24th July 16
Soybean Commodity Price to Soar Again - 23rd July 16
SPX Stock Market Uptrend Continues - 23rd July 16
Gold And Silver – Debt Addiction Will Carry Precious Metals Higher, Guaranteed - 23rd July 16
Pokemon Go - How to Play, First Use, Balls, Stops, Catching Pokemon's... Great Excercise! - 23rd July 16
7 Signs That the Gold Market Remains Resilient - 23rd July 16
Basic Income in The Time of Crisis - 23rd July 16
Silver Bull Faces Correction - 22nd July 16
The Serious Warning No One’s Talking About - 22nd July 16
Stock Market Insight from Greed, Volatility, and Put/Call Ratio - 22nd July 16
What Will Happen To the Stock Market When Interest Rates Rise? - 22nd July 16
How to Escape the World’s Biggest Ponzi Scheme - 22nd July 16
Addicted to Debt - We Can’t Borrow from the Future Anymore - 21st July 16
Not Everything Is Bullish for Gold - 21st July 16
Don’t Get Sucked Back Into the Stock Market - The Big Picture Hasn’t Changed - 21st July 16
Silver – Caught Inside - 21st July 16
Forex: "The Markets Are Getting Exciting!" - 20th July 16
China Economic Troubles - Is Kyle Bass Finally Getting His Revenge? - 20th July 16
Why Lithium Will See Another Price Spike This Fall - 20th July 16
The Peak Oil Paradox Revisited - 19th July 16
SPX Challenges the Upper Trendline - 19th July 16
Missing ’28 Pages’ of the 9/11 Report Released into Blitzkrieg of World Events - 19th July 16
Likelihood of Organized Disruption at GOP Convention - 19th July 16
More on the ‘Breadth Thrust’ and Stock Market Internals - 19th July 16
FX Traders: Get a Free Week of Forecasts (Details inside) - 19th July 16
Ups and Downs in Gold and Crude Oil Price - 19th July 16
Keep an Eye on ‘Bitcoin’ as the Next ‘Financial Crisis’ Starts! - 18th July 16
Erdogan Might Have Known about the Coup but Didn’t Prevent It on Purpose - 18th July 16
More Deflation Ahead: Silver, Gold And Their Mining Stocks A Must-Have - 18th July 16
Stock Market Minor Top? - 18th July 16

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

The Power of the Wave Principle

Copper Poised For Breakout While Gold And Silver Falter

Commodities / Copper Feb 17, 2013 - 11:06 AM GMT

By: Michael_Noonan

Commodities

One concept to keep in mind when making a trade selection is that of relative
strength. Given the choice of two or more trade candidates to buy, always go
with the strongest performer. When selling, always sell the weakest one. This
is a simple factor that often gets overlooked. Go with proven strength. Go with
anything that is proven or confirmed. The odds are then in your favor.


Given a choice of potential candidates, in this case metals, many will stick with
sentimental favorites, or choose a weaker of the two or three possibilities on the
basis that the weaker one will “catch up.” Wrong, wrong, wrong. There may be
times when that can and will happen, but on balance, relative strength will keep
its edge, and anytime you can gain an edge in trading, take it.

Copper is on the verge of an upside breakout, which we think started at the end
of January, the 30th to be exact, or it can be setting up for a massive failure.
Anything can happen in the markets, but you base your decisions on what is known
and not on what may or may not happen. Could the potential breakout fail? Yes.
Based on what is known, as of Friday, the odds say No.

To the charts.

Trend and market harmony are the most important considerations. We can all see from
the monthly a series of higher highs and higher lows up until September 2011 when price
entered into a triangle or wedge formation. We pose the question, is this a breakout in
the making, or is it a set-up for failure?

The reason is because we see the last three months are smaller in range to the upside,
relative to the larger downside bar, 5th from the end. It is always important to view as
many sides as possible so as not to get lulled into missing subtle clues. In the end, you go
with the stronger points that make the case.

The current monthly bar is just barely above the supply line, like a rising sunset or a
periscope about to go back down. Monthly charts are not used for timing, and what we
take away from the monthly is the trend: Up.

We admit to a myopic look at copper because it is at a specific juncture that must prove
itself as a breakout in the making. There are other considerations, to be sure, but if the
potential move fails at the starting line, other factors become non-issues in the analysis.
You can read the comments on the chart instead of repeating them here. What we see as
key are the last three weeks, and last week in particular as the possible tipping point for
higher prices to come.

Last week was the highest volume since the end of November, and the week closed lower
than the previous two, but not very convincingly. In fact, we take the counter-argument
that the volume was net buying. Why? On increased effort, [volume], sellers were unable
to extend the range lower. Why? Because buyers were taking everything being offered,
thus preventing price from moving lower. At least, that is our common sense POV. [Point of view].

Markets are consistently full of logic.

We spoke of trend and harmony, at the outset of this analysis on the monthly. There is
consistency in all three time frames supportive of how we read developing market activity
in the present tense. All of the trading days in February are above the supply line because
of the current Mar contract, v expiring front-month contracts on the monthly and weekly.

Again, we narrow the focus, this time to the last five TDs on the chart. 5th bar from the
end was a sell-off with no downside follow-through. What happened to the sellers? The
next 4 TDs are within that Monday range. All four closes form a cluster with each one barely lower than the other.

Despite the increase in volume for the last 3 TDs, [Trading Days], closes are above mid-
range each bar, and the lows stayed above a 50% retracement area for the week. There
are two Buys marked on the chart. One was on the breakout day of 30 January, [See
Copper - Upside Breakout, http://bit.ly/XPGW2u, last chart], and based upon Friday’s
sell-off, while gold and silver were getting hit hard, copper held well, so a second position
was added, with notice given during the day in the Trade Recommendation section. Here
is where the relative strength factor comes in.

We also did an analysis of 60 and 20 minute charts to see the character of each day’s bar
composition. Volume for each day was highest at the low, [smart money buying from
weak hands exiting/selling], and the closes were above mid-range-to-higher on each day.
If copper were to fail and not rally, volume would have been at the highs of each day’s
intra day activity, which was not the case.

It was a “no-brainer” to add another position on a sell-off that demonstrated it was not
really selling off very much, and we read developing market activity as buying, anticipating
a rally soon to follow. We see copper as a “Go With” trade until proven otherwise.

By Michael Noonan

http://edgetraderplus.com

Michael Noonan, mn@edgetraderplus.com, is a Chicago-based trader with over 30 years in the business. His sole approach to analysis is derived from developing market pattern behavior, found in the form of Price, Volume, and Time, and it is generated from the best source possible, the market itself.

© 2013 Copyright Michael Noonan - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Michael Noonan Archive

© 2005-2016 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Catching a Falling Financial Knife