The price of copper has been crushed.
Just two months ago, the metal was trading for $5.11 per pound. It’s now at $4.11.
That’s nearly a 20% drop – in two months!
This action has just about wiped out all the gains for 2024. Copper has erased the big rally that started the year. And now the bronze metal is in deeply oversold conditions.
But this is the sort of rapid decline in a commodity’s price that often creates the conditions for a “snap-back” rally. So, it’s probably a good time to bet on a rally in the price of copper.
Copper’s Dreary Setup
Most folks will probably have a tough time making that bet – because the chart looks like death. But it’s from this sort of setup that sharp, oversold bounces can occur.
Here’s how copper looks right now…
The price of copper rarely strays more than 10% away from its 50-day moving average (MA), represented by the blue line, before reversing back toward the line.
At its high in May, copper was trading 15% above its 50-day MA. It was overbought and overextended to the upside. The chart had gone parabolic and was vulnerable to a decline.
It took only two weeks for copper to “snap-back” to its 50-day MA. And, that decline has continued.
On Wednesday, copper closed at $4.11 per pound. That’s 10% below its 50-day MA line. This extreme move indicates an oversold and overextended condition.
All the various moving averages also expanded far away from each other. And the price of copper is approaching an “obvious” support line near $4.00 per pound.
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So, the stage is set for another “snap-back” move – this time, to the upside.
Of course, it’s not a guaranteed rally.
But if copper behaves as it has during previous extreme conditions, then the metal could trade above $4.50 per pound within the next few weeks.
That’s a 10% gain from the current price – which is an outstanding return if it happens within the next month or so.
Best regards and good trading,
Jeff Clark
Editor, Market Minute
P.S. Copper may be approaching a rally, but I’m focused on the “Blackout Window” – a 10-day period before the FOMC announcement on July 31.
Most traders trade after the announcement and base their moves on what happens to interest rates… but in reality, it’s the time before these announcements that can make or break the average investor’s retirement.
Check out how we use this window to profit – over and over again, no matter what the Fed announces – right here.