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Copper ‘Breaking Higher,’ $7,760 ‘In Play’: Technical Analysis

By Chanyaporn Chanjaroen

Jan. 5 (Bloomberg) -- Copper, which more than doubled last year, is “breaking higher” after passing through a so-called Fibonacci retracement level, according to technical analysis by Dan Smith, an analyst at Standard Chartered Plc.

Copper’s rise above $7,495 a metric ton on the London Metal Exchange yesterday was a 76.4 percent retracement level, and that means $7,760 a ton is “in play now,” Smith wrote in a report. The $7,760 price is the low the metal reached in June 2008, one month before reaching a record $8,940 a ton.

“The break above the previous high suggests we have more room to move upside from here,” London-based Smith said today by phone.

Copper had its best year in at least two decades in 2009 as demand in China, the world’s largest buyer, climbed to a record. Prices have advanced another 1 percent this year after workers went on strike in Chile, the world’s largest copper producing nation.

In technical analysis, investors and analysts study charts of trading patterns and prices to predict changes in a security, commodity, currency or index. Fibonacci analysis is based on the theory that prices rise or fall by certain percentages after reaching a high or low. The $7,495 price was a 76.4 percent retracement of the range between the high of $8,940 in July 2008 and the four-year low of $2,817.25 in December of that year.

Support, or clusters of buying, is at $6,950 a ton for the futures traded on the London Metal Exchange, Smith said. Smith is the most accurate forecaster in the weekly Bloomberg copper survey.

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aqEmpfIQAldY