Copper prices are moving into a correction after a one-month move in the uptrend. Yesterday, the price exceeded $8700 per ton for the first time since the end of April. Probably, reaching this level became a trigger for the mass fixation of profits, and as a result there is a pullback of copper quotes below the level of 8500. At the same time, if the copper market fundamentals are taken into account, the correction should soon be replaced by a new wave of growth.
Red metal inventories at the London Metal Exchange (LME) fell to their lowest level since 2021. Dan Smith, head of research at Amalgamated Metal Trading, points to a rather tight supply situation. Copper stocks, which are widely used in energy and construction, have been declining steadily in recent weeks. The large volume of withdrawals from LME storages additionally worsened the situation with the amount of available raw materials.
According to Smith, the current situation in the copper market suggests that the price will continue rising to the level of $8870 per ton over the next few weeks. The number of people looking to buy red metal remains high, ensuring a steady demand.
In China, the world's largest consumer of metals, copper inventories in Shanghai Stock Exchange storage fell by 1.1% to 66,400 tons this week. Limited supply due to weak imports led to a drop in inventories to their lowest level since January. Copper inventories have already fallen by more than 70% since February's peak. This Thursday and Friday are days off in China, otherwise the decline in copper inventories could be even more significant.
Now it's time to watch the strength of the correctional pullback in copper prices. The first target is at Fibonacci level of 23.6% (8500) and then the quotes may go to 38.2% (8380) and 50% (8280) levels. Opening long positions in this range looks interesting, and the levels of 8500 and 8600 can be considered as Take profit levels.
The following trading strategy option can be suggested:
Buy copper at a price decrease in the 8280-8380 range. Take profit 1 – 8500. Take profit 2 – 8600. Stop loss – 8180.
This content is for informational purposes only and is not intended to be investing advice.
