Copper futures: Rising wedge structure and equity market implications
|Copper futures are unfolding within a rising wedge pattern, signaling that the market is running into its final (5th) wave of the structure. This pattern often suggests waning momentum but can still push higher before a potential reversal.
Key levels & projection:
Upside target: 5.2900, with key resistance at 4.8880 (Resistance-1) , 5.0395 (Resistance-2), and 5.1990 (Resistance-3)
Short-term support: 4.5185 – Key level to hold for continued upside
Long-term critical support: 4.0050 – Any breach here can trigger a sharp downside move
How to trade the rising wedge?
In a rising wedge, price action narrows within converging trendlines. While it can extend higher, a break below support confirms a reversal.
Strategy: Traders can ride the upside towards 5.2900, but must watch for weakness near the upper trendline & the resistances mentioned above. If price breaks below 4.5185, caution is needed.
Line in the sand: 4.0050 – Holding this level offers potential buying opportunities, but a breakdown below 4.0050 could lead to a larger decline.
Copper could complete this upside move holding key & critical support by the end of Q3, making these levels sacrosanct for both trend traders and breakout traders.
Impact on equities – Dow Jones & S&P 500
Copper is often seen as a leading indicator for the economy, as rising copper prices suggest strong demand, economic expansion, and higher inflation expectations.
If Copper continues its projected rally:
✅ Dow Jones & S&P 500 could remain resilient, supported by strong industrial and commodities demand.
✅ Cyclicals like Industrials, Materials, and Energy stocks may outperform, as higher copper prices signal economic strength.
✅ The Fed may turn more cautious on rate cuts, as rising copper prices often hint at inflationary pressures.
If Copper reverses sharply below 4.0050:
⚠️ It may signal economic slowdown concerns, potentially leading to a pullback in equities.
⚠️ Growth sectors may come under pressure, and defensive plays (Utilities, Healthcare) could see relative strength.
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