As I mentioned in recent posts for copper on the daily timeframe, the prospect of an extended rally was unlikely given the proximity of the volume point of control at the $4.275 lbs area and denoted with the yellow dashed line, and so it has proved to be. So, what can we expect next for Doctor Copper?
And the short answer is a period of congestion in this region, and yesterday’s price action was a foretaste of this, closing as it did with a Doji candle and perched on the VPOC itself. Notice also the strong levels of both resistance and support which have developed around this level on the accumulation and distribution indicator.
Above we have the red dashed line of resistance, and below we have an even thicker level shown with the blue dashed line for support. What the indicator does is thicken the level each time it is tested and holds, and so provides an instant visual picture of the strength of such levels, and around the VPOC this is often where they become strongest forming a channel of price based resistance and support. In addition, this is coupled with deep areas of volume-based support and resistance with more to the upside than the downside, so any move higher will require considerable effort (volume) if it is to be sustained. Note too how the volume declined on the recent mini-rally, and for any breakaway from this region, we need to see this increasing and not decreasing.
So, in summary, levels are key here and to the upside, those to watch are first $4.35lbs and thereafter $4.40lbs where the volume on the VPOC histogram falls away. On the downside, it is $4.23 lbs and thereafter $4.15lbs which would open the way to a deeper move.