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Hugo in HTO Trading,

Copper: Potential double bottom

Commodities fell and metals traded near six-year low after August China’s Industrial Profits hit the lowest since October 2011 at -8.8% and International Monetary Fund (IMF) Chief Lagarde spoke about global lower economic growth forecast around 3.4% in 2015, weaker than in 2014. These implied a slowdown in demand for commodities, especially from China.

Copper held steady last week but weaker US jobs data fuelled concerns about growth in the world’s largest economy and persistent worries about demand in top consumer China weighed on sentiment. However production cuts by top miners put a floor under the market but trading was thin with top consumer China on holiday.

The commodity since the beginning of the year fell more than 16.5% and is in a potential phase change from a bearish to a recovery phase. Last week copper rallied with a narrow range and close near the high of the week on average volume. The Stochastic is showing a bearish momentum and is below the 50 mid line.

Expecting an upward move to a weekly resistance at 249.89 on a break above previous week high at 237.65 (scenario 1) or a break below previous week low at 222.55 could push the commodity to a Fibonacci extension at 209.19 (scenario 2).