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Comex copper loses steam as funds become sellers

NEW YORK: comex copper futures could not sustain their rise as funds gained momentum on the selling side, setting off light stops and pushing prices lower.

Floor traders said a breakout above 89.20 would have sent prices up through 90.00 cents but cautioned that a close below Wednesday's low of 88.30 cents could push prices even further down.

Active March settled down 0.95 cent at 87.30 cents a lb after trading 86.75 to 88.50 cents. January closed off 0.90 cent at 86.60 cents and February ended at 86.60 cents, 0.95 cent lower.

"Today, we're washing back and forth, consolidating yesterday's recent run-up," said Richard Hirsch, president of Sogemin Metals. "Everyone I talk to is extremely bullish. It's a technical dream and a fundamental puzzle."

Resistance levels on Comex had been moving targets as each day brought fresh buying, sending prices to new heights. Some traders are putting nearby resistance at 88.50 cents, the day's high, followed by 89.00 cents in the March contract.

Open interest in the March contract continues to rise, sitting at around 58,000. The market had been flying high amid fund buying coupled with a strong performance by aluminum.

Aluminum prices propelled through upside targets to hit $1,752 a tonne before retreating to $1,750 a tonne on Wednesday's close. Aluminum lost steam to drift down to $1,740 a tonne, off $10.

A shortage of alumina and stronger global demand, has been driving the rallying price. Prices jumped from $140 a tonne after a blast at Kaiser Aluminum Corp's alumina refinery in July to up around the $400 a tonne level.

LME copper also lost its grip on the upside to close down $12 at $1,923 a tonne. It briefly touched an intra-day high of $1,940 before slipping lower.

"I think we're going higher. I think there's a lot of confusion in the market, there's a lot of doubt, fear and concern that we are way overdone. That is true," said Hirsch.

"However, most bull markets are built on crawling a wall of fear. It's a good two-way market."

Final estmated volumes on Thursday reached 14,000 contracts, compared with final offical volumes Wednesday of 12,272 contracts and an official turnover of 10,695 contracts on Tuesday.

The sell-off sent the nine-day relative strength index for March copper down to 69 at the close of business Thursday, just slightly up from its previous close at 79.

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