COPPER: Technical Analysis – Risk of strike in Chile may raise copper prices

By IFCMarkets

Risk of strike in Chile may raise copper prices

The trade union of the world’s largest copper mine Escondida, requires an improvement of wages and negotiates with its owner – the Australian company BHP Billiton. Will the upward correction of copper prices continue?

BHP Billiton said that it agrees to increase workers’ wages by 1.5% and pay $27,700 in the form of a bonus. The trade union requires a bonus in the amount of $40,000 and a 5% wage increase. Last year, Escondida mine workers declared a 44-day strike and the world copper prices rose by 15-20%. This mine produces approximately 10% of copper in the world. The Chilean Copper Commission (Cochilco) forecasts an increase in copper to $3.1 per pound in 2019, and a slight increase in the world demand by 0.4% in the current year. Let us note that according to forecasts, the world demand for copper in 2018-2019 will exceed the world production by nearly 3 million tons per year. It is supposed that the difference will be covered in the expense of copper scrap and recycling, as well as from world reserves.

On the daily timeframe, Copper: D1 has overcome the resistance line of the downtrend. A number of technical analysis indicators formed buy signals. The further price increase is possible in case of an increase in global demand and a reduction in production in Chile.

• The Parabolic indicator gives a bullish signal.
• The Bollinger bands have widened, which indicates high volatility. They are titled upward.
• The RSI indicator is below 50. It has formed a positive divergence.
• The MACD indicator gives a bullish signal.

The bullish momentum may develop in case Copper exceeds the two last fractal highs at 2.88. This level may serve as an entry point. The initial stop loss may be placed below the last fractal low, the annual low and the Parabolic signal at 2.68. After opening the pending order, we shall move the stop to the next fractal low following the Bollinger and Parabolic signals. Thus, we are changing the potential profit/loss to the breakeven point. More risk-averse traders may switch to the 4-hour chart after the trade and place there a stop loss moving it in the direction of the trade. If the price meets the stop level (2.68) without reaching the order (2.88), we recommend to close the position: the market sustains internal changes that were not taken into account.

Summary of technical analysis

Market Analysis provided by IFCMarkets