20000114

Comex copper soaring to new highs

NEW YORK: A flurry of fund buying sent Comex copper futures on Wednesday soaring to new contract highs basis the March position, and traders said the market's technical outlook was strong.

Funds started the buying spree in late trading Tuesday and picked up the pace to lift values.

The active March copper contract jumped 2.25 cents to 86.60 cents a lb, trading between 84.30 and the new contract high of 86.95. Spot January closed up 2.10 cents at 85.90 while February ended up 2.30 cents at 86.20 cents.

"There was a lot of fund buying, a lot of new buying," said one Comex trader. "Volume was pretty good. We hit stops but I think the stops were new buying and not stop-losses (shortcovering). They were initiating new positions."

"It was more of a technical move and we took out stops above 85.40 and through the contract highs around 86.20-86.50 level," agreed David Meger, metals analyst at Alaron Trading in Chicago.

Funds are still top-heavy with long positions prevailing and selling had been coming in at the higher end of the range to keep prices in check.

"We had a very fund-motivated move today and we are sitting on very heavy resistance. The last commitment of traders report, including options and futures, was showing a net long position of 20,095 contracts," said Meger.

Chart watchers said key resistance is sitting at 87.00 cents with psychological resistance at 90.00 cents, and support is pegged at around 83.80 and 84.00 cents.

"Right now, it's purely a numbers game. They're just adding fuel to the fire," said the trader. "It really looks like it's a sale up here but people are afraid to get short."

London trading made significant strides toward the upside on technical trading to inch just above its resistance. The three months price closed the afternoon kerb at $1,882, up $23. After surpassing the $1,880 resistance level, dealers are now eyeing a move toward $1,900.

Final volumes Wednesday were estimated at 16,000 contracts, compared with final volumes Tuesday at an estimated 9,000 contracts.

"We have anticipation of better demand down the road. But the bottom line is you have an excess of supply with good demand but not great demand worldwide," said Meger.

"Anticipation is one thing but actual demand is another and we have no driving force to see this move continue other than from a technical perspective," he added. "As of right now, one has to sit with the technical move because we've opened the door for a continuation move higher, and I think it behooves you to see if the market can continue through...87.00 cents."

LME warehouse stocks rose 1,150 tonnes to 788,400 tonnes in Wednesday's report. Comex inventories on Tuesday were up 244 short tons at 93,851 tons.

The nine-day relative strength index for March copper blew through the neutral zone to just below overbought territory as it closed at 69, compared with 37 on Tuesday.

Technical analysts usually interpret an RSI reading at 70 or higher as indicating overbought conditions and a reading at 30 or lower as oversold.-Reuters