Lead Takes Advantage of the Optimism Recovery

After Copper yesterday, we focus today on another metal that took advantage of the optimism recovery that drove the equity and commodities markets up since early March. This metal is lead.

The long-term bearish trend that really started in October 2007 seems to be over now. After a low posted on last December 19, lead prices have corrected by 61% in three months. They bounced back from $882 per tonne (point A on the chart) to a recent high of $1,425 (posted 2 days ago).

Click to enlarge

The industrial metals index (GSCI) which includes copper, zinc, aluminium, nickel and lead prices, is typically a good indicator which gives a global trend on those commodities. Technically, this index has cleared the upside of a horizontal trading channel that was valid since last December. It’s a first sign that a further global bullish move may be possible.

Since December 2008, the different bullish waves followed by consolidation phases have been building a “clean” chartist positive scenario. A bullish trend is indeed usually exhausted in 2 types of situation:

• When the price action is unable to post new highs and eventually break below a support line, which typically triggers a bearish countertrend
• Or after a new high has been posted and that the price action falls back below the previous high

Here, none of those two possibilities occurred. Oppositely, the price action has been posting regular higher highs (points A, B and C) and higher lows (points D, E and F). Another important indication is that the new low of late March (point C) was higher than the previous high (point D). This means that the pull-back was just a correction and not a new trend on the downside. As a result, prices bounced back and should reach the new target around $1,550.

The MACD is well oriented and is backed by an oblique support line (in green).

This level is just 9% higher than the current level and it corresponds to an area where a previous low was posted in July 2008 (point G). It then became a new high in late October/early November (point H).

Tagged as: bearish trend, bullish trend, commodities, copper, equity, GSCI, lead, MACD, metal, recovery