The price of copper climbed to 2.9154 yesterday as it continues the impressive recovery from the low at 1.9322 in January, 2016. Copper prices are vitally important not only to mining companies like Freeport-McMoran, but to the world economy, as well. It is true the metal has gained over 50% in value in just a year and a half, but even the strongest recoveries are interrupted by a correction from time to time. Elliott Wave analysis of the daily price chart of copper would help us find out if another one should be expected soon.
The daily chart shows XCU/USD‘s entire rally since January 2016. As visible, it forms a textbook five-wave impulse pattern, labeled as wave I/A, whose wave (5) is still under construction. The sub-waves of waves (3) and 3 are also easy to recognize. This price pattern means two things. First, that copper has officially reversed its downtrend and is now pointing north in the long-term. And second, since the theory postulates that every impulse is followed by a three-wave correction in the other direction, this chart suggests we should get ready for a noteworthy pullback in wave II/B. Wave II/B is supposed to drag the price of copper down to the support area of wave (4), which means the bears could re-visit 2.5000, before the 5-3 wave cycle is complete and the uptrend could resume. In any case, new lows below 1.9300 are highly unlikely. And while this count suggests joining the bulls now is a risky endeavor, trying to pick the top and shorting copper could prove to be a very costly mistake, if the market chooses the following alternative count.
If the previous count was optimistic in the long-term, this one makes things look good for the bulls even in the not-so-distant future. It implies the idea that copper is not approaching the end of a fifth wave, but is actually advancing in the most powerful phase of every impulse – wave (3) of III. If this is the correct outlook, the three-wave retracement we were expecting would not occur at all. Instead, much higher levels are on the table. That is exactly why shorting an uptrend never recommended – it is extremely dangerous. Having these two alternatives in mind, “hope for the best, prepare for the worst” sounds like a good motto.