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Comex March copper sags under technical selling

NEW YORK: Comex copper futures ended lower on technical selling, erasing almost all the gains made during last Thursday's rally.

Active March ended at 82.70 cents a lb, falling 1.70 cents and trading between 82.10 and 85.10 cents. Spot February dropped 1.90 cents to end at 82.35 cents a lb and May closed off 1.70 cents at 83.75 cents a lb.

"It's a continuation of technical selling. We had selling caused by March open interest liquidation and we certainly saw the funds come into copper and push pretty heavily," said Richard Hirsch, president of Sogemin Metals.

"It got hit pretty hard," said Scott Meyers, technical analyst with Pioneer Futures. "We're building a wedge that's tightening right now. Technically, you're going to look for some kind of break-out but whether it's to the upside or the downside remains to be seen."

Technically, chartists are placing near-term support for the March contract at 81.50/60, followed by significant support at 81.25 cents, with resistance at 85.30 cents.

"The market is very thin," said a broker. "I think you're seeing some general liquidation on technical factors. Once we started crossing 84.00, we were seeing this wholesale liquidation come in and volume picked up."

On the London Metal Exchange, three-months copper sagged under weak technical conditions to close off $38 at $1,844.50 a tonne.

"London copper really suffered in line with aluminum. The combination of technical selling and fund selling in New York, along with aluminum's weakness in London was all we needed," said Hirsch.

Aluminum stocks into LME warehouses have risen to 844,225 tonnes, a three-year high. The jump in stocks coupled with a backwardation provided enough impetus for a technical sell-off. The three months price ended down $31 at $1,656 a tonne.

LME copper stocks were down 1,500 tonnes to 799,475 tonnes on Tuesday while Comex stocks were off 195 short tons at 95,000 tons on Monday.

Estimated final volume for Comex copper on Tuesday reached 12,000 contracts, compared to official volumes on Monday of only 4,794 contracts.

In copper industry news, Severonikel, a part of Russian metals giant Norilsk Nickel said Tuesday that it commissioned two new copper smelting facilities.

One unit, a concentrate smelter, will cut Severonikel's use of fuel oil, while the second unit will be a copper scrap smelter with an annual capacity of 40,000 tonnes.-Reuters