Copper prices have surged in recent weeks amid growing optimism about the economic outlook for China and the world, but some warn that the rise has outstripped real demand and a correction could be in the offing. A rally that began in July has pushed the metal’s price to a roughly three-year high. Copper hovered around $ 6,900 per ton on the London Metal Exchange in off-hours trading Monday evening Japan time, up more than 20% from the most recent low in early May.

Technical Outlook

On weekly chart, the MCX Copper prices have completed bearish AB=CD harmonic pattern at 451.35 levels. In the pattern, AB leg is from 309.90 to 414.75, BC leg completed at 353.85 (61.80% of AB) and CD leg completed at 451.35 (161.80% of the BC). On the daily chart, a consolidation pattern backed by rise in volume is visible after a strong rally which indicates distribution at the market top. Moreover, a momentum indicator RSI has formed a negative divergence on the daily chart. 

Furthermore, daily RSI has coming out from the overbought zone and expected to drift down in the short term. For short term prospective, one can initiate short position in MCX Copper at CMP Rs.441 or on rise in prices till Rs.450 levels for the downside target of Rs.410. 

However, reversal in the bearish view can be seen if Copper prices break above 466 levels (78.6% of the fall from 512.65 to 291.50). Overall, we maintain our bearish view in Copper for one to two months; However, on the lower end 410-400 levels may act as support where buying may come in.

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