Akcieatrhy (Akcieatrhy.cz)
Markets  |  March 28, 2013 11:37:15

Copper: finally we see growth?!


When we last analyzed the copper, it was possible to buy $ 3.75 to trade at 4 USD. However, the situation did not develop so well and traders who came to the store, activate your stop loss orders and implemented a few cents. The following day, the price fell to $ 3.47 levels. Given the size of trading volume and rate of decline could be expected that it will continue to the next downturn.

The history recorded in the chart is important, but more important are the actual forces that create market activity because it is the result of all previous developments. Let's look again at what the market tells us about their further development.

The big question is always, "Why?" What growth / decline stopped here? Why is the extent of decline / growth and large / small? Why is a volume so large / small? After the question: "Why?" Should the next question: "Who?" That we should explain the past development. Just as in life, everything that is happening in the markets happens for a reason. Let's see if we can find a reason for what is happening.

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We see the first signs of falling candle with a big price range in September 2012. This type of large downward candles is called "EDM - Ease of Downward Movement = fall without obstacles" This type of price candles means that the seller have the situation in hand and absolutely steamrollered shoppers who are massacred during the downturn until the seller (offer) does not run . Why did this happen?

If you look at the six and seven candles back, you will see a small test plugs that failed in an attempt to overcome a recent peak in April. These two small candles say to all who are interested, the market is now in the hands of sellers. After these two candlelight followed by a three-day growth.
But why each small candle price range for decreasing the volume? Because demand (purchases) is small, and the result is a slight back pressure on the sales effort. These tracks will guide us to the cause of a great falling (EDM) candle in September.

Yes, it is an analysis of hindsight and the usual objection is that if we know the outcome, you can find thousands of reasons. However, it is necessary to find a correct cause of how markets behave as they behave as such from the very beginning and again and again. Once we can understand the behavior of markets in the past, we can better understand how markets in the presence and can provide business advantage.

As he continued the story of this downturn? Instead of price after EDM continued to fall with increasing volume, the price starts to go away. Why? Who sold into decline? The public and the weak players usually buy.Who shopped here? You started to buy the same players who started selling in April and August. What we see here is the transfer of contracts from the hands of weak players in the hands of strong players. Strong players control the market and purchases are made strong institutional investors, which is known as "smart money".

Rectangles indicate initial support, then the first resistance, which, not incidentally, a three-day halt weak growth in August. Then followed a similar ping-pong - support resistance down. Rectangles with height decreases. Why?

As the price trend in the side continues its way to the right (RHS - Right Hand Side), and this applies to all lateral trends while preparing to exit. One direction or the other. The ratio of supply and demand is more or less balanced. This equilibrium is never stable and must inevitably become unstable.It would help if we find out which way to deflect this imbalance? It is evident that in this case we do not ask "Why?"

Between the last two lateral trends indicated by the rectangle is high declining candle closing price near its lows. We see there also the largest trading volume. Knowing "why" and "who" in this case is essential. Knowing "who", so it sometimes explain "why". Who sells and more importantly, who buys here?

Who sold? The public, who expect higher prices and weak players who could not handle such a price decline. Who bought? Professionals who have enough power to be able to dominate the market. Repeat it again and again. It's always the same, but implementation is always similar. Action has its own rhythm and for this cause and result.

Note the suddenness with which the last three weeks, halt the decline. Longer decreasing price and the closing price form a cluster at the same level. Clusters of closing prices form a breather before the next downturn, OR this fall break stops and turns toward market activity growth.

Markets do not send us an invitation to participate in the creation of profit. However, the behavior of the market, there is logic and "how", the price evolves in time has its causes. Maybe look at the daily chart will bring to our efforts to find some logic more clear.

Graphical analysis

How the market reacts to these distinct movements, gives us important information. In the weekly chart, we have seen a three-day growth with closing prices near daily lows, responded in August 2012 on a two-day slump.

If we use the same logic as in the weekly chart, we see that the public and the weak players sell and leave their positions, as the price falls cascade down. In just five trading days is erased three shopping effort. Why?

Why? Because "someone" wants a much lower price. Note the high business volume. Compared with April 2012, the seller (someone) sold more than shoppers were able to absorb. Immediately afterwards, in May, the price plunged. Notice the drop in volumes. The big players have already sold at much higher prices. The volume is then increased again in late May and early June.Why? He whom we call here "someone" started to buy back positions speculating on the decline.

Logic of the situation shows that the big players and the "smart money" shopped throughout the fall at the end of February. Volume declined in March, because the market has left no selling of the public and weak players. Responding to a steep decline was only moderate. Why? There were no sellers.

When you are no longer selling what the next move will likely? Demand becomes king, will rule and start new growth. The public, which was crowding the stores, the new growth will not trust you will not want to buy or psychological reasons, so prices will rise freely without much resistance.

This is one of the options. The second is that copper falls far below the current respite is just a pause before the next fall. Which option would you choose?

Answer: we do not know which direction the price issue. We can not estimate, or "anticipate". Instead, we want to market himself told us what direction it will take. To have us confirmed its further direction. What event in the market tell us? Growth without barriers (EUM - Ease of Upward Movement) for increasing volume or decrease without any obstacles (EDM - Ease of Downward Movement for increasing volume. Soon as we market reveals its intentions, it remains to swim with the current.

We can find a clue?

Graphical analysis

Last daily chart shows the total daily volumes. The bottom graph shows the volumes of individual contracts. Let's look at the numbers 1, 2 and 3

1: The largest volumes have appeared to a minimum closing price closes in the middle of the candle. Always say that the market is the best source of information. Here we market tells the whole story about the great players and the "smart money" buy. The proof is high volume. Why? Because the public is not able to produce such high volume.
It is a reaction to the panic sale of minima, where small players can no longer bear another drop in panic selling, or they are activated tracks, or "margin calls". The logic gives us the answer to the question "who" and "why".

Position closing price tells us that there were buyers. Otherwise there would have to be the closing price somewhere in the lows. Decrease in volume over the next four days indicates that selling pressure disappeared.

2: High growing candle with high volume. Re-read the paragraph with "answers" over the previous graph. We see 'em purchases, although theoretically they should govern seller.

3: Note the "response" to this purchase at point "2". After the formation of side channel price is not able to break the previous low and continue to decline. Efforts to decrease no fulfillment. Why not?

It is likely that at this level of copper is accumulated, or may still fall. If there will be a return, it will be important information that you communicate to us the market. From that we will already be able to tell which direction the market will.

"Why" and "who" and simple logic are small pieces of the puzzle that we need to "estimate" what direction the price issue. If you wait for the confirmation of market, we remove most of the risk when entering into position.

"Anticipation" further movement is basic business skills. Can we be wrong? Of course. Choosing a suitable business every day. However, if we can eliminate most of the risks and know the chances of a successful business, so the advantage is on our side. Some stores are unprofitable, but profitable businesses that more than compensate.

And what is the source of that information? Market.

Graphical analysis

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