Copper – Flag Formation Points to Dead Cat Bounce

After declining for six weeks in a row, copper prices stabilised last week having found support around $2 per pound, a key psychological level.

At the moment it’s unclear whether this new found stability marks a bottoming in copper or just a brief period of respite, but the early signals suggest it may be the latter.

Firstly it ran into resistance today around $2.11, a previous level of support, and has failed to gather any upside momentum since. This suggests there isn’t much bullish appetite, even at these low levels and makes this look more like a dead cat bounce than a broader reversal.

Supporting this is the flag that appears to be forming on the 4-hour chart. A flag is typically a continuation pattern and can form as a result of profit taking at a key level, which appears to be what we’re seeing now.

If this is the case, once we see some consolidation and it rises back to an attractive level, we could see selling resume. The break of the flag support would indicate that this has occurred. In the meantime, it could continue to consolidate for a little longer.

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