February 2019 | Base Metals
Technical analysis: Getting overbought
After a strong run-up in recent days extended the January’s gains, many base metals have started to look technically overbought and would benefit from a period of consolidation.
Aluminium Follow-through selling on Friday February 1 initially put a negative spin on LME aluminium for the start of this week, until Monday’s rally, which saw January’s high of $1,924 per tonne beaten. Prior to this, selling momentum stalled above the rising 20 DMA – buyers have been leaning on this technical support in the short term. The technical indicators have been less supportive, though. The daily RSI and stochastic lines are vulnerable to further downside. A solid break below the converging wedge-like formation could lead to a test of the January low. Buyers need to prevent a lower low in the very short term and their return on Monday seems to have prevented this for now. The 100 DMA ($1,957 per tonne) is the next key overhead resistance level in their sights.
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