Chart of the week: Copper looks primed for a major breakout

Since the start of February 2011 copper has been building energy bouncing back and forth inside a long triangle consolidation pattern. Now though this vital industrial metal is nearing the end of the pattern and it looks primed for a major breakout.

Some traders refer to copper as “Dr. Copper” and joke that the metal has ‘a Ph.D. in economics. The reason is that it tends to be a good barometer of global economic conditions thanks to its many industrial uses. The chart below shows two scenarios for the breakout. One that bodes well for the global economy, and one that doesn’t.

A 4 year weekly chart of copper (Click on the chart for a larger version)

A 4 year weekly chart of copper (Click on the chart for a larger version)

Chart courtesy of stockcharts.com

A powerful breakout could provide a decent trade for those with a longer-term strategy, however the direction of the move will not be known until it occurs. A decisive weekly close either above or below the blue trend lines should be accompanied by a jump in trading volume.

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