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Technical analysis can be a highly useful tool for active traders in making their investment decisions. The study and understanding of technical analysis of markets is not as challenging as many might think – the endeavor can be as simple as determining the direction of a price trend on a chart. Such basic chart patterns shouldn’t be dismissed as being too simplistic to be effective, either. In fact, simple chart patterns and price studies can often be the most powerful technical tools a trader can possess.
Following is a near-term technical examination of two popular Sprott exchange-traded funds: Sprott Copper Miners (NASDAQ: COPP ) and Junior Copper Miners (NASDAQ: COPJ ).
COPP Prices Trending Higher, With No Early Chart Clues The Uptrend Is Close To Ending
The daily bar chart for COPP shows prices in late August hit a seven-month high of 47.00 as the bulls are in firm near-term technical control. When prices are trending up on a chart, traders may then often reckon the path of least resistance for prices will remain sideways to higher—until there is a significantly bearish technical signal to suggest the uptrend is coming to an end. So far, no significant bearish clues are showing up for COPP.
Another price-friendly near-term chart signal for COPP has been the Moving Average Convergence Divergence (MACD) indicator that is in an overall bullish posture at present. The blue MACD line in mid-July made a bullish line crossover signal by crossing above the red trigger line. Both lines have been trending higher since then, which is also a bullish technical signal for COPP.
The next near-term upside price objective for the COPP bulls is pushing prices above chart resistance at the January high of 47.46, which is also the high for the life of the ETF. Bulls are close to doing just that, at present. A push above that key technical resistance level would provide the bulls with more technical power to then suggest a quick challenge of psychological resistance at 50.00, or above.
TrendingOther chart clues that COPP bulls would have the strength to extend the price uptrend would be two trading sessions in a row of strong gains for prices, accompanied by higher-than-normal daily price volumes. That would suggest bulls have the strength and conviction to keep the price uptrend alive for a longer period of time.
A technically bullish weekly high close on a Friday for COPP would be another clue that a price uptrend can be sustained. Furthermore, daily closes in prices that tend to be nearer their session highs, as opposed to nearer their session lows or near the middle of their daily trading ranges, would also be a bullish technical signal.
Bearish early warning flags for the COPP bulls that the price uptrend is petering out or even ending would be a close in prices below the last "reaction low" in the price uptrend, which is located at the mid-August low of 41.00. More serious chart damage would be inflicted if COPP prices dropped below the July low of 34.95. That selling pressure would suggest a price downtrend could be developing and could be sustainable.
The Uptrend In COPJ Prices Is Also The Bulls’ Friend
The daily bar chart for COPJ shows prices have been trending up since mid-July and last week hit an about 5.5-month high. While the price uptrend remains in place at present, note that the Relative Strength Index (RSI) – seen at the bottom of the chart – in early August and just recently showed readings above 70.00. Any RSI reading above 70.00 generally suggests a market could potentially be short-term overdone on the upside and vulnerable to at least a downside price "correction". Indeed, COPJ prices have just seen some routine, corrective selling pressure that is arguably constructive for keeping the price uptrend alive and well.
See also in the history of the past few months that when the RSI oscillator moved above the 70.00 level, COPJ prices did see downside price corrections in existing uptrends. Thus, the next time COPJ prices move above the RSI reading of 70.00, traders may want to watch for the possibility of another routine downside price correction.
The two popular shorter-term moving averages that many veteran traders follow (9- and 18-day) are also in a bullish posture, as the 9-day is above the 18-day moving average and both lines are trending up. A bearish early warning signal that COPJ prices have put in a near-term top would be if a bearish line crossover signal occurred, whereby the 9-day crossed back below the 18-day moving average.
There is strong technical chart support for COPJ located at 40.00, which could provide a strong line of defense for the bulls during any significant sell-off impacting prices.
A strong technical clue to suggest COPJ prices have put in a near-term top and may be starting to trend lower would be a close in prices below the key 40.00 support level. Other early, bearish technical signals that COPJ prices have, or are close to, putting in a market top would be two sessions in a row of solid price losses, accompanied by higher daily volume numbers. Also, a technically bearish weekly low close on a Friday would begin to suggest the bulls are finally out of gas and that prices may potentially then at least trade sideways, if not start a fledgling downtrend on the daily bar chart.
Featured image from Shutterstock .
This post contains sponsored content and was created in collaboration with a third-party partner. Benzinga is a publisher and does not provide personalized investment advice or act as a broker or dealer. This content is for informational purposes only and is not intended to be investing advice or an offer or solicitation to buy or sell any security. Read further disclosures here .
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