Copper was extremely bullish in the last couple of months. It started retracing last week as it hit $3.20 which was 3 percent below our first price target. What’s next? Is the copper market bullish or bearish?

The copper chart shows an interesting recurring pattern in the last 2 years. Basically, it has spent twice one year in a tight trading range, only to rise twice sharply in a short period of time. Note that we identified copper’s rally last year: Copper Price Surging, Close To New Secular Bull Market

Copper can now do two things basically:

• either it remains above $2.80 in which case it confirms its breakout and creates a new trading range (the 3d one in 2 years time)
• or it falls back in its previous trading range in which case the most likely path is that it will trade between $2.45 and $2.70.

We believe copper has broken out of its long term bear market recently. At the end of July we got a confirmation of the copper price breakout. The start of a new bull market does not necessarily mean that things will go up in a straight line. The bull market can start off slowly similar to the pattern we now see on copper’s chart.

This market needs additional time to consolidate recent gains. For now coppers is in a new bull market. Investors are watching both the $2.80 and $2.45 levels. Both seem attractive entry points, but a phased entry could be a safe strategy. Alternatively, investors can first simply watch and see how low the retracement goes before entering this market.

(Click on image to enlarge)