Learn with ETMarkets: Why copper could lead to riches and how to call your trades?

Base metals play a crucial role in India's industrial and economic development. Which base metal should one purchase, and what does the chart indicate? Investing in base metals involves understanding metal performance, market volatility, the associated risks, and potential rewards, which aids in developing effective investment strategies.

Why copper?

Base metals, such as copper, aluminium, and zinc, are the unsung heroes of industrial development. They are fundamental to construction, manufacturing, and various other sectors. For investors, these metals offer opportunities to diversify portfolios and hedge against economic uncertainties. This article focuses on copper, highlighting why it is a strong candidate for investment and how to leverage technical analysis for making informed trading decisions.

India's rapid industrialization and infrastructure development rely heavily on base metals. These metals are essential for building everything from electrical wiring to machinery and transportation infrastructure. As the country continues to grow, the demand for base metals is expected to rise, making them a strategic investment.

Copper stands out among base metals due to its extensive use in electrical equipment, construction, and industrial machinery. Its excellent conductivity, durability, and malleability make it indispensable in both traditional and green technologies, including electric vehicles and renewable energy systems.

Technical Analysis of Copper

Current Market Scenario:

• Copper has shown resilience and potential for growth, making it a favorable choice for investors.
  
• Recent technical indicators suggest a buying opportunity.
  

Technically:

• The 50-day EMA is a crucial support level for copper, indicating the overall trend.
  
• When the price is above the 50-day EMA, it suggests a bullish trend.
  
• Current analysis shows copper holding above the 50-day EMA, reinforcing a positive outlook.
  
• An RSI above 50 indicates bullish momentum.
  
• Copper's RSI is holding steady above the 50 mark on the daily chart, suggesting sustained buying interest.
  
• The lower Bollinger Band provides support, with copper's support zone at 800-820.
  
• Buying near the lower Bollinger Band (around 840-835) is a strategic move, capitalizing on dips.
  

Suggested Trading Strategy:

• Entry Point: Buy copper on dips.
  
• Support Levels: Utilize the 50-day EMA and the lower Bollinger Band as support at 800-820.
  
• Expected Price Rise: Target a price rise towards 920.
  
• Stop Loss: Set a stop loss at 740 to manage risk.
  

Conclusion

Copper offers a robust investment opportunity amid India's industrial growth and global demand for sustainable technologies. By leveraging technical tools like the 50-day EMA, RSI, and Bollinger Bands, investors can make informed decisions and capitalize on market trends.

Investing in copper not only supports portfolio diversification but also aligns with the broader economic development goals of India. As always, it's crucial to stay updated on market conditions and adjust strategies accordingly to navigate the inherent risks and rewards of trading base metals.

(The author is Vice President, Research Analyst - Commodity and Currency at LKP Securities)

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)