The Copper price tends to lead and forecast the direction of all commodities and commodity shares. In the week past the Copper price fell with momentum to a very important support line.
This support was defined by a 78% retracement of the last daily range and the support line of a falling wedge technical pattern. The falling wedge is a bullish pattern. This is an important confluence of two uncorrelated trading techniques.
Furthermore the pullback from the high in March occurred in three waves of a similar degree. This three wave pullback after a strong advance charted a bullish pattern called a Gartley 222. The 222 is quite easy to see for those skilled in reading harmonic patterns. It’s also a bullish pattern and there is lots of information on the pattern available on the internet. The Copper chart is shown below.
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If this level breaks and both these bullish patterns fail then Copper and commodity shares have much further to fall.
The falling wedge, its sister the rising wedge and the Gartley 222 have been my favorite trading setups for many years after learning the techniques from H M Gartleys book. For this reason I am optimistic that the level in Copper can hold and have taken a small bet “long” from this level. As I write at the end of the trading week the Copper market has charted a double bottom on an h4 chart and that’s a positive although a very early sign.
I like the trade as I am onboard at a great level which means I need only a small risk to prove whether the trade will be a winner or not. If my analysis proves correct then there is blue sky ahead and lots of potential places to add and build a monster position. My analysis over the years has proven to be correct about 70% of the time. This means 30% of the time I am wrong. On the next trade we don’t know whether it one of the 70 or one of the 30. Getting you head around that and thinking in probabilities is what the business of short term trading is all about.
Clearly if the level holds then commodity shares (after days of big falls) can be a great buy. I haven’t bought any as yet but will be looking to take my first longer term positions in the large London listed miners if my analysis holds. Over the past year my activities in commodity shares have been short term (3-13 days) swing trades.
I am extremely excited about the future in commodity shares. As I have communicated at the webcasts and User Groups, there will be a life changing percentage move in these shares sooner or later.
This entry is brief as I am travelling this weekend. However it could easily be the most important I have done in this forum. Please sit and wait until a bottom has been confirmed. If these levels break then Anglos et al have a lot further to fall.
MR Gann favored waiting until a swing low was in place. Early in his work he used a three day swing chart but later in his career and life changed to a 2 day swing chart. This simply means that the market should record two days of increasing highs prior to the bottom being made.
On Friday morning VectorVest advised caution in buying shares and it was sage advice. World markets fell hard and the fall in London aided by a Euro “in or out” opinion poll. Sterling tanked.
The DEW market timing system remains positive and the underlying trend is UP and Confirmed by price action. The Primary Wave turned down on Friday and my shares had a poor day. Dart I have long felt has a date with 600 and its getting close to that. It can easily get down to 550 which is 62% of the last range.
Gleeson is the lowest in my portfolio when sorted by RT and 2 pence above its stop. I will have no hesitation in getting rid of this share if the stop is confirmed by a close below the value.
Marshalls has hit the VectorVest stop. The share bottomed out on Friday at the confluence of a 62% retracement and where resistance became support from a trendline starting at the high of last October. The chart shows another Gartley 222 pattern which is bullish but the price and the VectorVest stop are reality. If the market turns back upwards there is a lot of potential in Marshalls.
It’s going to be a volatile run until the 23rd of June.
June 10th 2016
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