Double top suggests a further decline in copper prices

Copper prices continue to fall. The price declined by almost 6% from the local highs of mid-April, and the current technical picture suggests the continuation of the downward movement. On the daily copper chart, a double top pattern might be observed, and today there is a breakdown of the neckline from the top down. Now sellers will target last month’s lows near the level of 8,500.

The industrial metals market is now focused on China’s demand. Copper that is actively used in energy and construction hit a half-year high in January after the removal of COVID restrictions. However, since then the red metal prices have decreased, as demand growth in China still falls short of expectations. Weak domestic and export demand could slow China’s economic growth.

The Yangshan copper premium, reflecting demand for imported copper in China, fell by 5% last week and is now below $23 per ton. Import premium has been steadily declining for more than a month. At the same time, China's refined copper production jumped 9% to a record high of 1.05 million tons in March, suggesting a potential oversupply of the metal.

Yesterday’s weakening of the dollar supported precious metals, but copper failed to break the downtrend. Deteriorating business activity in the U.S. is putting pressure on the American currency, also leading to deteriorating commodity demand for industrial production.

After breaking through the neckline at the level of 8,730, the double top is close to completing its formation. The last step of declining to March’s lows at 8,500 is left. Both oversold condition and signs of price reversal are not yet visible on the technical indicators. Thus, the way to the 8,500 level for copper prices is now open and may be passed in the nearest days.

The following trading strategy may be offered:

Sell copper in the range of 8,620–8,650. Take profit – 8,500. Stop loss – 8,730.

Traders may also use the Trailing stop instead of the fixed Stop loss at their discretion.