How OZL and SFR are faring on the charts amid a surge in copper price?

Source: Djelen,Shutterstock

Summary

  • China’s factory and retail sectors data surged in the first two months of the year.
  • China’s Feb month exports rose by more than 154.90% year-on-year basis.
  • SHFE copper has broken the crucial resistance level and tested the multi-year highs.
  • OZL prices are trading above the crucial upward sloping trend line support on the weekly chart and formed a negative divergence with RSI (14-period).
  • SFR prices are trading in a rising wedge formation on a weekly chart and getting crucial support from the Parabolic SAR indicator.

In the last couple of months, Shanghai Futures Exchange’s (SHFE) copper prices have surged on account of China’s factory and retail sectors activity data that has shown a recovery in the first two months of the year. As per the data published by the National Bureau of Statistics, industrial output jumped 35.10% in the first two months, stronger than a median forecast for a 30.00% surge in a Reuters poll. Retail sales number increased 33.80%, better than a forecast 32% rise and made a significant jump from 4.6% growth in December 2020.

The February 2021 export numbers also surged that helped the copper prices to hit multi-year highs. China’s Jan-Feb trade surplus remained at USD 103.25 B vs. USD 60 B estimate. The Feb month exports rose by more than 154.90% year-on-year basis, while imports gained 17.30%. All these factors played an important role in the copper price rally which is standing at multi-year highs.

Technical outlook on SHFE copper prices:

On the monthly chart, the SHFE copper price has broken out of a multi-year rectangle channel pattern at CNY 56,208 level on 30 October 2020, after that the price has touched a 9-year high of CNY 70,570 level on 25 February 2021. Price has gained ~26% post-breakout to a recent high of CNY 70,570. Copper price is on a strong upward trajectory, which indicates bulls are still in action.

SHFE copper’s monthly chart

Source: Refinitiv, Thomson Reuters; Analysis: Kalkine Group 

Currently, copper prices are trading above the upper band of the channel pattern. The bulls are expected to dominate the direction till the time price sustains above the major support level of CNY 56,208 and may remain active till the horizontal resistance level of CNY 75,400. Besides, copper price is trading above the 21-SMA, which is acting as another support zone. Prices are well placed above the Parabolic SAR indicator, providing further strength to the trend.  However, the momentum oscillator RSI (14-period) is in the overbought zone at ~74 levels, indicating that a correction from here may drift the price lower towards the support zone.

OZ Minerals Ltd on a weekly chart

Source: Refinitiv, Thomson Reuters; Analysis: Kalkine Group 

OZ Minerals Ltd. (ASX:OZL) prices have been continuously in the bull move from the low of AUD 12.50 made on 24 September 2020 to a recent 52-week high of AUD 23.68 on 16 March 2021. The stock has been in a strong uptrend, forming a series of higher tops and higher bottoms which indicate bulls are on the driving seat. 

The prices are continuously trading above an upward sloping trendline and currently trading near to the trendline support level of AUD 20.21 on the weekly chart. Any upside movement from the current levels might be dominated by the bulls and expected to remain active till the resistance level of AUD 29.50. The stock is trading above the 21-period SMA, which is acting as a crucial support zone for the stock.

The major support level for the stock is at the AUD 19 level and any price action with some degree of confirmation below this level might attract bearish sentiments ahead. The momentum oscillator RSI (14-period) has remained in the overbought zone at ~72 levels and formed a negative divergence on the chart.

Read More: Buying the Dips – A Tapestry of Technical Tools and Strategy

Sandfire Resources Ltd. on a weekly chart

Source: Refinitiv, Thomson Reuters; Analysis: Kalkine Group 

Sandfire Resources Ltd. (ASX:SFR) has climbed almost ~60 percent from its October 2020 low of AUD 3.97 to a high of AUD 6.365 made on 03 March 2021. The stock prices are trading in a rising wedge formation for the past one year on the weekly chart. The stock has also given a breakout above its long-term falling trend line at AUD 4.92 level. After taking the support of falling trendline, the stock tested 52-week high at AUD 6.365.

Now, the next upside resistance is at AUD 6.65 level and in the short run, any sustainable move above AUD 6.65 levels might attract more bullish sentiments and push the prices towards the AUD 8.35 level. Currently, the price is trading above the 21-period SMA, which indicates bulls have the upper hand in the price action for the short run. The price is trading above the Parabolic SAR indicator, acting as a crucial support zone at AUD 5.03 level. However, the momentum oscillator RSI (14-period) is trading at ~58 levels, indicating that a correction from here may drift the price lower towards the support zone.

Conclusion:

Based on the above fundamental news and technical outlook, the SHFE copper seems to be in an uptrend. Currently, copper prices are moving strongly and holding the key support zone. The chart patterns suggest that there might be some action expected in OZL and SFR if the price remains above the support zone or breaks the crucial resistance zone in the coming weeks.


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