Technical observations of RossClark@shaw.ca

When measured on a daily, weekly and monthly basis, copper prices have now moved from an oversold position in January to an overbought position. While it would be easy to shrug off any one signal, the cluster indicators in various time frames suggests that another correction is right around the corner.

The monthly chart is generating only its second Sequential Sell signal since 1980. The previous one was followed by an outside reversal month that subsequently tested its major support.

Over the past 50 years, typical rallies from oversold levels have retraced to basic resistance lines and produced an improvement in the weekly RSI(14) of 29 to 42 points. The current rally has generated an improvement of 35 points in the RSI. Prices are also back into the heart of the consolidation of last May through October and have managed to produce a weekly sequential sell setup. Over the past three decades such setups have been evident within two weeks of many interim highs.

From a seasonal perspective, we are approaching the end of a favourable time window. The next seasonal strength in copper should be anticipated to start after mid-June.

On a daily basis, the past two days have registered upside exhaustion.

Quadra Mining has been a favourite in the sector, moving with copper prices. The action since the beginning of the month is exacerbated by the announcement of an offer to acquire International Molybdenum. Upside exhaustion alerts are being produced so we'd be inclined to lighten up. The three previous exhaustion alerts have been followed by corrections to the 50-day moving average.

Quadra

Another leader in the base metals has been FNX Mining. It is also showing signs of excess, with weekly exhaustion alerts. A 20% correction would not be a surprise.

FNX Mining