Is Dr. Copper ready to turn lower?

It’s time to take another look at Dr. Copper which appears to be in a steady down trend since completing a bearish consolidation triangle @ 379.2 (2.3.2013). Initial decline from 379.2 – 304.00 was in 3 waves and completed wave “a” of the triangle thrust. This was followed by a pull back to 50 fib (342.00) which we have labelled as the end of wave “b”. We have already seen new lows below 304.00 which gives us more confidence in this view.

As drop from 379.2 – 304.00 was in 3 waves, we expect to see another 3 wave drop from 342 corrective peak as well. 7 swing drop to 298.4 completed 1st swing i.e. wave “W” of the larger 3 wave drop that we expect and recent recovery is wave “X”. Dropping down to a 60 minute chart, we see wave “X” has taken the form of a double corrective structure when metal is trading higher in final swing of the correction. As price stays above rising 1 hour trend line and more importantly 310.5, look for a test of 324.00 (61.8 fib) – 326.00 (1.236 ext) to reject the metal for lower prices. A rally through 3.35 (1.618 ext) would be concerning for this view but it’s only a break of 342.00 which would negate this wave count and may result in a test of 350.6 before the metal turns lower again.

This sort of price action suggests sideways consolidation between 398.9 (2.9.2012) – 379.2 (2.4.2013) was a bearish triangle which explains the sharp move lower. Metal found support ahead of 299.4 low and has already corrected 50% of the decline from 379.2 peak. Attached 1 hour chart shows, decline from failed test of 50 fib was in 5 waves which adds further conviction to the view that a secondary peak has formed @ 3.42.

If metal follows our proposed path, we expect it to drop to new lows below 298.4 toward 283.00 and may be even 267.3 (equal legs) to complete a cycle not only from 342.00 but also from 379.2 peak.