By Kiran Jani
Copper is often called ‘Dr. Copper due to its reliability as an economic indicator. The movement of copper prices frequently offers valuable insights into broader economic trends and can sometimes anticipate shifts in the equity markets.
Copper and Nifty Relationship
The correlation between copper prices and the Nifty index often reflects broader economic trends, as copper is widely considered a leading indicator for global economic health. As an industrial metal, copper is heavily tied to the performance of sectors like construction, manufacturing, and infrastructure, influencing stock market performance.
When copper prices rise, it usually signals strong demand in global markets, especially from emerging economies like China, which can boost the performance of companies listed on the Nifty, particularly those in the metal, energy, and infrastructure sectors. Conversely, a decline in copper prices may indicate slowing global economic growth, potentially dampening investor sentiment and impacting the broader market, including the Nifty. However, the copper and Nifty prices are directly co-related.
Comparison Chart – Copper Vs. Nifty
From 2015 to the present, major up-and-down moves in copper prices have been exactly correlated with Nifty prices.
Copper – Bullish continuation pattern in play
Copper experienced a sharp 20% decline from its May 2024 peak of 10,450, reaching a low of 8,768. However, a strong rebound from this critical long-term support level indicates renewed buying interest and the potential for a trend reversal.
Key Indicators Highlighting Copper’s Bullish Outlook:
- Inverted Head and Shoulders Breakout – The breakout from this key reversal pattern strengthens the bullish sentiment.
- 200-Day SMA Crossover – Copper has moved above its 200-day Simple Moving Average (SMA) for the first time since November 2024, signalling a potential shift in trend.
- RSI Momentum Strengthening – The 14-period Relative Strength Index (RSI) remains above 60, showing bullish divergence and suggesting further upside potential.
Copper has delivered a solid 33% return since the start of 2024; however, the price has entered a corrective phase, falling from 10,960 to 8,770 over the past eight months. Early signs of a potential recovery are emerging. The price has already broken out from the inverted head-and-shoulders pattern and moved above the 200-day SMA. These technical indicators suggest that copper could be preparing for a rebound.
Nifty – Bullish Reversal in Sight
The Nifty50 index has faced downward pressure since October 2024, posting a negative return of 16%. However, recent price action shows early signs of a potential reversal, with multiple bullish signals emerging on the daily chart.
Key Technical Indicators:
- Bullish Reversal Candlestick – A Morning Star pattern has formed, signalling a potential reversal in trend.
- Inverted Head and Shoulders Breakout – A classic bullish reversal pattern suggests a potential trend shift.
- Falling Wedge – The falling wedge pattern has broken out, indicating a reversal within the falling channel.
- RSI Strengthening – The 14-period RSI is above 50, indicating improving momentum and suggesting further upside potential.
The Nifty index has been in a downtrend for the past six months, marking its most extended period of decline. Over this challenging phase, the Nifty has corrected from its all-time high of 26,250 to 21,900. However, recent technical indicators suggest a potential shift in momentum.
The price has formed multiple bullish reversal patterns, including the head and shoulders and falling wedge formations, signalling accumulation and a possible trend reversal. The 14-period RSI has also entered the bullish zone, suggesting strengthening momentum. If Nifty prices hold a recent low of 21,900, we can expect the price to touch 24,000 in the near future.
Final Take
Technical analysis has shown that copper prices often lead to movements in equity markets. With strong reversal signals in play, copper’s bullish momentum could also help drive Nifty higher. The Nifty index shows early signs of a potential recovery, with bullish chart patterns, a rising RSI, and key technical breakouts indicating that momentum is building. While market volatility remains a factor, these technical developments suggest attractive upside potential.
Disclaimer:
Note: The purpose of this article is only to share interesting charts, data points and thought-provoking opinions. It is NOT a recommendation. If you wish to consider an investment, you are strongly advised to consult your advisor. This article is strictly for educative purposes only.
As per SEBI guidelines, the writer and his dependents may or may not hold the stocks/commodities/cryptos/any other assets discussed here. However, clients of Jainam Broking Limited may or may not own these securities.
Kiran Jani has over 15 years of experience as a trader and technical analyst in India’s financial markets. He is a well-known face on the business channels as Market Experts and has worked with Asit C Mehta, Kotak Commodities, and Axis Securities. Presently, he is Head of the Technical and Derivative Research Desk at Jainam Broking Limited.
Disclosure: The writer and his dependents do not hold the stocks discussed here. However, clients of Jainam Broking Limited may or may not own these securities.
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