Base Metals

Most of the news activity surrounding the stock market recently has revolved around the continued strength, or not, of the high profile tech stocks including Amazon, Tesla, Apple etc.  In the meantime there has been conspicuous and steady accumulation in another, considerably less exciting area: base metals.

Using the Base Metals ETF as a proxy, we observe that the price has moved out of a long down to sideways pattern over the past few months.

One of the components of that ETF is FCX, a major copper producer that has been locked in a sideways trend over the past 2 years.  On the weekly chart, we observe that the moving averages are beginning to converge indicative that the long downtrend has abated and the 2 year sideways range may change.

Looking at the shorter term daily chart, it appears that price action is beginning to break away from the base:

We must be aware of the levels of previous resistance which are slightly higher from here, but we should also note that another base metal stock that we have been following has also shown similar strong accumulation.

CENX was mentioned in an earlier post and we illustrated that the pattern looked to be one of accumulation from a long base.  The issue had a violent sell off over the past few weeks, but it has returned to the highs attained in mid summer.  We can observe that the price selloff stopped near the 200 day moving average and thus prevented the chart from turning decisively bearish.  Despite their forecasting abilities, charts can not predict random price spikes.  What they can reveal is the strength of longer term trends and logical transaction levels.

The weekly chart still shows that prices have moved above the long term base and above the increasingly positive moving averages.  While the price spike down was alarming, it appears that longer term accumulation is still underway.  We still expect a projection to the mid 20’s on this issue.  We expect base metal issues to continue higher.


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