NEW YORK (ETF Digest) -- Copper futures are taking off. Copper is an industrial metal and has a history of use for 10,000 years. It is seen as a leading indicator on whether or not the economy is expanding because of its wide use as a conductor of heat and electricity. There has been a great debate among the fundamental analysts about "Peak copper", similar to the arguments of "Peak oil", but in that we have only so many years left before the reserves will be too costly to continue to mine.
More and more pounds of "ore" are needed deeper and deeper into the surface to get the same weight in the metal apparently. This argument points to a much higher price in the long term for various reasons. It will be hard to replace Copper as it is 100% recyclable without any loss of quality. There have been many headlines in the news recently about copper thieves stealing the metal from anything they can get their hands on.
Let's take a look at some developments in the chart. Thursday's price action brought out a surge in volume, confirming the breakout from a symmetrical pricing pattern. This is what is known as an "Igniter Move."
An igniter move is when price and volume explode from a multipoint trendline. It signals demand from big money long term investors. This decreases the odds of a false breakout. Any breakout that happens on low volume is suspect. The symmetrical triangle is one of the most reliable pricing patterns in my experience. What it shows is a struggle between bulls and bears to dominate the trend. While they fight it out this builds tension for those who are long and those who are short as we converge into a point where one side is likely to run the other over. I stay on the sideline and don't guess which way it goes. Guessing is a poor strategy for a trader.
Although I don't rely on technical indicators to make trading decisions, it's worth noting the signals from the Relative Strength Indicator and the MACD studies. In the school of technical analysis, one popular trading signal is when the MACD has a centerline crossover. The RSI made new highs as well which is a confirming signal. Combined with the study of the auction and the pricing pattern this increased probabilities for a breakout to the upside.
