Copper Rally Stalls at All-Time High Amid Extreme Overbought Signals

Copper prices pulled back after hitting a new all-time high of $6.765, with technical analysis from Investing.com suggesting the powerful rally may be losing steam. While the broader uptrend remains in place, multiple indicators are now flashing warning signs of bullish exhaustion and a heightened risk of a technical correction.

Technical Red Flags Emerge

A confluence of technical signals points to mounting short-term risk. The market is now considered extremely overbought, with the Money Flow Index (MFI) reaching a high of 88.41, indicating crowded long positions and a greater potential for a sharp reversal.

Analysts also note several key warning signs on the charts:

• Bearish Divergence: The MACD indicator is showing a bearish divergence, where the price makes a new high but the indicator fails to do so. This often signals that upward momentum is fading.
• Potential Double Top: The price has been rejected twice from the all-time high, forming the potential beginnings of a "double top" pattern, a classic bearish reversal signal.

Trend Intact, but Caution Warranted

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Despite the short-term warnings, the underlying bullish structure for copper has not yet been broken. According to the analysis, the price remains above key long-term moving averages (SMA 20, 50, and 200) and the Ichimoku cloud, which are typically viewed as supportive of a continued uptrend.

However, the combination of extreme overbought conditions and strong resistance at a historical peak creates a volatile environment. Traders are now closely watching key price levels to determine if the current pullback is a temporary pause or the start of a deeper decline.

Key Levels to Watch

Market participants are focused on several critical price points that could dictate copper's next move:

• Immediate Resistance: The recent record high of $6.765 serves as the primary ceiling.
• Critical Support: A break below $6.58 is seen as a significant bearish trigger that could spark a "long squeeze," or forced selling from traders with bullish positions.
• Major Support Zone: The area between $6.35 and $6.40 represents a high-volume trading zone, which could provide substantial support in the event of a steeper sell-off.