Spot copper prices spent the first six months of this year moving lower below a declining trend line. In June they broke above that resistance and rallied 21% to their early September high. The bullish trend quickly reversed direction and was followed by a pullback to the 38% Fibonacci retracement level of the rally range. After several weeks of consolidation around the 50 day moving average there was a jump in the spot price last week. But at the same time there was a bearish diversion on the Freeport-McMoRan (FCX) chart, and it may be suggesting that there is more consolidation ahead for Dr. Copper.
Last Thursday the spot copper price rallied but a large high wick shooting star candle formed on the Freeport chart. This shooting star candle represents a failure to hold a higher price level and a potential reversal in trader sentiment. On Friday the spot price was little changed but a large dark candle formed on the Freeport chart, confirmation of the previous bearish reversal candle. Freeport shares have been forming a head and shoulders pattern for the last two months, above neckline and 200 day moving average support in the $13.75 to $13.50 area. It looks like this support zone will be retested this week.
The four month rally in copper saw the spot price up over 27% from trough to peak and Freeport shares up over 40% in that time. September’s pullback was healthy but it might not have been enough of a retracement for the markets to absorb those gains and re-energize buying interest, as the recent bearish diversion between the stock price and the spot price suggests.
The stock of the copper miner should follow the spot price of the metal, but in this case, the FCX chart looks weaker than the copper chart looks strong.