Copper Holds Critical Support, Eyes Breakout Above $6.867

Copper futures held support at the 20-day moving average this week, a sign that the bullish breakout attempt from an 11-week basing pattern remains alive, according to Bruce, a CMT charter holder.

The market pulled back to a seven-day low of $6.496 on Thursday, completing a 61.8% Fibonacci retracement of the prior upswing. Buyers stepped in at that level, driving the session to a close at $6.639 and forming a bullish hammer candlestick pattern. Bruce said the reaction at the 20-day MA shows improving short-term momentum, as long as Thursday's low holds.

Last week copper tried to break above the prior high of $6.716 from May, reaching a new trend high of $6.867. The breakout did not confirm with a close above that level. Still, the weekly chart recorded a higher high and a higher low. The week's low at $6.451 now serves as critical near-term support. A decline below that would signal increased downside risk, Bruce said.

If support at $6.496 holds, copper's next upside targets are near $6.946 and then $7.206, based on Fibonacci projections and extension levels. The immediate obstacle is the recent high of $6.867. On the downside, the 50-day moving average near $6.373 provides deeper support. The weekly low at $6.451 is the more important floor.

This week is ending with a narrow range inside last week's band, a consolidation pattern. The weekly high is $6.714, the low $6.496. Bruce said a successful hold of support would keep the basing breakout attempt in play and allow buyers another opportunity to challenge the recent high.