Chartology: "Slumping Copper at Risk of Big Drop" (how's $1.50 grab ya?)

Weakness begats weakness (until it doesn't) $2.9540 last.
From Barron's Getting Technical column:

Prices are tumbling thanks to bad economic news from China. Unless the metal soon stabilizes, the odds of a rout will rise.

Is the worst over? Perhaps not. And if not, watch out below.

Copper prices were trading benignly last week until Friday when they quickly fell 4.2%. Many were caught off guard by new reports of weak economic data in China. But as chart watchers like to say, surprises happen in the direction of the trend. In this case, that trend is down. And chart patterns suggest there is much more downside ahead.

While copper now trades at levels last seen in July 2010, bulls can argue that the current decline was a knee-jerk reaction to events and an overshoot of technical support on the charts.

Investors can track copper via the iPath Dow Jones UBS Copper Subindex Total Return exchange-traded note (ticker: JJC), but the Comex copper futures present a clearer picture for analysis (see Chart 1).

Chart 1

Copper

In this chart, copper dipped marginally below a long-term support level that has been in place for several years. On this time scale, the breakdown is not significant; therefore, bulls can say it was a merely due to short-term selling momentum.

Bears can argue that the late-December rally and January decline represented a failed upside breakout. In technical analysis, failed bullish signals usually turn into bearish signals; indeed, the trend has been solidly to the downside since then....MORE