BASE METALS ETF HITS FOUR-MONTH HIGH -- ZINC AND ALUM LEAD INDUSTRIAL METALS -- COPPER SETS A BEAR TRAP -- COPPER MINERS ETF ESTABLISHES A LONG BASE -- NON-FERROUS METALS INDEX BREAKS WEDGE RESISTANCE -- FREEPORT MCMORAN SHOWS POSITIVE MOMENTUM
BASE METALS ETF HITS FOUR-MONTH HIGH... Link for today's video. Chart 1 shows the Base Metals ETF (DBB) making waves with a resistance breakout and four-month high. I featured DBB in the Market Message on June 2nd as it challenged resistance and on June 9th as an inverse head-and-shoulders pattern took shape. John Murphy noted that the Commodity Tracking ETF (DBC) hit a nine-month high last week. Turning back to DBB, the break above 16.6 confirms the inverse head-and-shoulders and the upside target is in the 17.7 area. The height of the pattern (16.5 - 15.3 = 1.2) is added to the breakout zone for an upside target (16.5 + 1.2 = 17.7). Broken resistance turns first support** in the 16.4-16.6 area . The mid June low and a buffer mark key support in the 16-16.2 area. A move below 16 would negate this pattern and put the downtrend back in play. The indicator window shows MACD moving into positive territory the second week of May and remaining positive. Momentum is clearly bullish as long as MACD hold above the zero line.
(click to view a live version of this chart)
Chart 1
ZINC AND ALUM LEAD INDUSTRIAL METALS... As noted earlier, the Base Metals ETF consists of three metals: aluminum, copper and zinc, and each weighs around one third. Chart 2 shows spot zinc moving to a 52-week high with a surge this month. Note the zinc and aluminum charts were created with a user-defined index on a StockCharts PRO account. And, if you are wondering, I downloaded the data from quandl.com, which also has some rudimentary charting functions. On the price chart, zinc broke out with a big move in December, consolidated for several months and broke to a new 52-week high last week. This trend here is clearly up and this is positive for the Base Metals ETF.
Chart 2
Chart 3
Chart 3 shows spot aluminum breaking above an eighteen-month trend line in early June, falling back to 1800 and then moving back to 1850 last week. Aluminum broke out in April and looks poised for another breakout soon. The highs extending back to August mark a resistance zone and a move above this level would be quite bullish. Chart 4 shows the Aluminum ETN (JJU) breaking out in April and forming a higher low in May. This could be the start a rising peak-trough sequence. The indicator window shows the DJ US Aluminum Index ($DJUSAL) hitting several new highs this month.
(click to view a live version of this chart)
Chart 4
COPPER SETS A BEAR TRAP... Chart 5 shows the Copper ETN (JJC) breaking wedge support and then surging above this support break with a big move last week. Copper is the third piece of the puzzle and is looks like all three base metals are turning bullish. JJC hit a new low in mid March and then retraced 50-62% of the prior decline with a rising wedge. This looked like a classic correction within a bigger downtrend and the early June support break set the stage for a continuation of this downtrend. The break, however, did not hold as JJC surged above 38 over the last three days. Copper, it would appear, wants to move higher along with zinc and aluminum. This failed support break looks like a bear trap now and chartists can set support at 36.50 for now. The indicator window shows MACD turning back up and breaking its signal line.
(click to view a live version of this chart)
Chart 5
COPPER MINERS ETF ESTABLISHES A LONG BASE... Chart 6 shows the Copper Miners ETF (COPX) forming a long consolidation and challenging consolidation resistance with an advance over the last three months. COPX moved to new lows in the summer of 2013, and then tested these lows in December and March. Overall, the large consolidation looks like a base and a break above consolidation resistance would be bullish. The indicator window shows the Copper Miners ETF outperforming Spot Copper the last six months.
(click to view a live version of this chart)
Chart 6
(click to view a live version of this chart)
Chart 7
Chart 7 shows the Copper Miners ETF over the last eight months for more granularity. The ETF broke triangle resistance in mid May and then broke above the February-March highs. This breakout is largely holding as broken resistance turned into support in the 9.6-9.7 area. Note that COPX is a volatile ETF that contains copper stocks from all over the world, including the US, Canada, Mexico, China, Australia and other countries. Chart 8 shows Southern Peru Copper (SCCO) breaking a triangle trend line and challenging the April-May highs.
(click to view a live version of this chart)
Chart 8
NON-FERROUS METALS INDEX BREAKS WEDGE RESISTANCE... Chart 9 shows the DJ US Non-Ferrous Metals Index ($DJUSNF) breaking wedge resistance with a big surge over the last four days. Non-ferrous metals are metals or alloys that do not contain significant amounts of iron. Aluminum, copper, lead, nickel, tin, titanium and zinc are non-ferrous metals. $DJUSNF broke out of a big wedge in late March, corrected with a smaller wedge in May-June and then broke out again this month. The recent surge-breakout affirms support in the 440-445 area and argues for a continuation of the bigger uptrend. This, in turn, targets a move to new highs - provided support holds.
(click to view a live version of this chart)
Chart 9
FREEPORT MCMORAN SHOWS POSITIVE MOMENTUM... Chart 10 shows Freeport McMoran Copper&Gold (FCX) breaking out with a big move over the last five days. Freeport's name is a big deceiving because it bought a little company called Plains Exploration & Production for some $9 billion. Freeport produces around 9% of the world's copper and this acquisition provides some serious exposure of oil and gas. On the weekly chart, FCX fell below 30 after the strikes in Papau New Guinea in September 2011 and then moved into a large consolidation. The stock fell again after it announced the Plains acquisition, but remained within the consolidation.
(click to view a live version of this chart)
Chart 10
The last twelve months paint an interesting picture for the stock. Notice how the stock broke resistance in the 30-32 area with a surge in September 2013 and then corrected with a 62% retracement. This corrective pullback also formed a falling wedge and the stock broke wedge resistance with a move to the mid 30s. This weekly chart is looking quite positive and we could see a run to the resistance zone in the 38-40 area. A close below 33 would call for a reassessment. The indicator window shows the weekly MACD Histogram in positive territory, which means that MACD is above its signal line. Chart 11 shows a daily chart for reference.
