close icon

Copper’s Selloff Not a New Bear Market

Copper fell by over 58% between February 2011 and January 2016. By late-2017 it looked like the commodity was finally out of the woods as the price rose to almost $3.30. Analyst were already anticipating even higher prices driven by an increased demand by the electric vehicle manufacturers and China’s economic growth. Alas, the market thought otherwise and as of this writing, XCUUSD trades below $2.75 after a spectacular selloff from $3.2959 to $2.6920 in the last five weeks.

According to the news, the sharp decline is caused by the trade war between the United States and China. We have another explanation and it also provides a clue about Dr. Copper’s next big move. Take a look at it below.
copper Elliott wave chart
According to the Elliott Wave Principle, mass psychology forms repetitive price patterns, which can be recognized on the price chart of financial instruments. Five-wave patterns, knows as impulses, indicate the direction of the larger trend. Every impulse, on the other hand, is followed by a three-wave correction in the opposite direction before the larger trend resumes.

Keep that in mind and take another look at the chart above. It shows that copper’s recovery from $1.9322 to $3.2978 can be seen as an impulse pattern, labeled (1)-(2)-(3)-(4)-(5), where wave (3) is extended. This means the current plunge must be part of the corresponding three-wave retracement in wave II/B. If this count is correct, wave II/B is already looking for a bottom, since it can be seen as a regular (a)-(b)-(c) flat correction.

In addition, a simple line can be drawn through the high of wave (1) and the low of wave 2 of (3). It served as a resistance when the price first touched it, but was then breached to the upside and turned into a support by the bulls. It makes sense to expect this line to deliver another bullish reversal for the start of wave III/C.

In conclusion, copper’s recent weakness might look scary or even terrifying, but the Wave principle suggests it is just a normal pullback within the larger uptrend, whose next phase should lift the price to a new major high, despite the ongoing trade war between the world’s two largest economies.

Did you like this analysis? Learn to do it yourself with our eBook Elliott Wave guide!



Stay informed with our newsletter

Latest Elliott Wave analysis on different topics delivered to you weekly.

Privacy policy
You may also like:

Natural Gas: The Rally Continues… For Now

It has been only a week since our last update on natural gas, but what an eventful week it was. On September 27th, the price was hovering around $2.99, following a recovery from $2.759 to as high as $3.088. The Elliott Wave Principle, which had previously put us ahead of that rally, this time suggested…

Read More »

Natural Gas Price: Is the Rally Over?

Two weeks ago, on September 13th, the price of natural gas was hovering around $2.83, following a decline from as high as $2.996. Fortunately, the Elliott Wave Principle helped us recognize the fact that the recent weakness was nothing more than a temporary pullback within a larger bullish setup. So instead of joining the bears…

Read More »

Natural Gas Price Headed for the $3 Mark Again?

The price of natural gas fell to as low as $2.704 on July 19th, before recovering to $2.996 on August 21st, only to decline again to $2.759 on September 10th. As of this writing, natural gas trades at $2.850, but in order to find out what to expect from now on, we have to take…

Read More »

Copper Facing a Correction Within Uptrend

The price of copper climbed to 2.9154 yesterday as it continues the impressive recovery from the low at 1.9322 in January, 2016. Copper prices are vitally important not only to mining companies like Freeport-McMoran, but to the world economy, as well. It is true the metal has gained over 50% in value in just a…

Read More »

Price of Palladium at a Critical Juncture

It has been a slow and choppy advance, but the price of palladium somehow managed to climb from as low as $450 in January, 2016, to $818 as of this writing. This means that an investment in palladium would have returned nearly 82% since the start of last year. However, the past is not always a…

Read More »

Ethereum Ready for a Pullback?

Less than two years since its launch on July 30, 2015, ethereum has already become the second largest cryptocurrency in the world, with a market capitalization of roughly $4.5 billion, trailing only to bitcoin’s $20 billion. We are definitely not the people to ask how exactly the blockchain technology works, but ethereum’s decentralized nature means its price…

Read More »

NZDUSD: Interpreting the Recent Shine Loss

NZDUSD has been rising during the last month and a half, but lost its shine recently by dropping from 0.7374 to as low as 0.7155 in just five trading days. As always, the main question is where is the pair going to from now on? If you do not want to blindly follow the herd,…

Read More »

More analyses