Copper futures (December 2017 contract) hit a three-year high of 3.1665 today as the commodity extended its 4-month long bull run. The rally has reinforced the bullish medium-term outlook that has been in place since November 2016, which had weakened while prices consolidated during the early part of the year.
The short-term bias remains strongly bullish according to the momentum indicators, but with both the RSI and the stochastics in overbought territory, the risk of a near-term correction is high. Prices briefly spiked above the upper linear regression channel today, before falling back towards the upper channel line. Further gains would take the focus to the 3.20 and 3.40 levels as the next key resistance areas.
In the event of a downside reversal, support will likely come from the 3.0960 area, which was a heavily congested region in late August/early September. Bigger declines would see support coming from the 3.0500 and 2.9950 areas, while a drop below the lower channel line (currently at 2.90) would open the way towards the 50-day moving average at 2.85.
A breach below the 50-day moving average would shift the short-term bias to negative.
