Last week saw the worst selloff in two years as investors became increasingly concerned about an impending trade war. Following this selloff, metals seemed to calm down significantly. However, copper, along with other base metals, fell again in Shanghai this morning.
This decline seems to have taken place because of events that played out on Friday. China finally responded to Trump’s Section 232 tariffs on steel and aluminum imports by announcing plans to impose reciprocal tariffs on approximately $3 billion worth of goods originating in the US, including seamless steel pipes and aluminum scrap, strengthening the potential for slowed global economic growth.
Following this announcement, the price of copper fell 1.15 percent, as base metals posted the worst weekly decline since early February. The price crossed below a consolidation since September, as it crossed below the 200 dma, signaling a top, with a 2.83 implied target.
Trading Strategies
Conservative traders would wait for a full return move to retest the broken uptrend line, then retreat, with at least one red candle covering the preceding green candle’s real body.
Moderate traders may wait for the return move, for a better entry, but not necessarily for the confirmation of the reversal.
Aggressive traders may short immediately, providing they can afford a meaningful stop-loss, preferably above 3.00 (above the up trend line and the psychological round number) or the risk to their account’s equity.
There are many trading strategies available for the same instrument in the same time. A trader must establish a plan, which would include his resources and temperament. This is crucial and determines success or failure.
Pair entries and exits should provide a minimum 1:3 risk-reward ratio. They should suit your timeframe, with the understanding that the further the prices, the longer it will take to achieve them. Finally, understand that these guidelines are probability-based, which means by definition they include losses on individual trades, with the aim of profits on overall trades.