1. Market Recap: Yesterday, SH Copper opened high but fell to below the 60500 line and then made several unsuccessful attempts to break through the 60500 line during the day. The opening price of December 2012 contract was 60,690 yuan/ton, and the closing price was 60,490 yuan/ton, which increased by 1.22% compared with the settlement price of the previous trading day. Trading volume decreased from 763,688 lots to 465,462 lots, and open interest decreased by 8,490 lots to 441,168 lots. By noon yesterday, the Shanghai Metal Net's #1 copper was quoted at 59,350-59,650 yuan/ton, with a discount of -500 to -400 yuan/ton. Overnight, LME copper fell by 2.25 dollars/ton to 8,449 dollars/ton, with an increase of 2.33%, and inventory increased by 300 tons to 305,725 tons.
2. News Interpretation: On February 22, HSBC announced that China's preliminary manufacturing PMI for February rose from last month's 48.8 to 49.7, but new export orders continued to drop significantly to 47.4, hitting an 8-month low, indicating severe export conditions. The market had always expected China's demand to rebound after the Spring Festival holiday in January, but China's buying has remained light. Although China's copper import data surged previously, a large part of it turned into inventory, and the continuously decreasing LME copper inventory saw a rare increase yesterday, which may be another confirmation of weak copper consumption. From the reaction of China's spot market, the discount of spot widened further yesterday, which also does not support the short-term rise of copper prices.
3. Technical Analysis: Yesterday, SH Copper transformed from a sharp fall to a high fluctuation. Technically speaking, the 60,800 above the December 2012 contract can serve as a short-term resistance level, and this point can be used as a good reference for direction selection in operation. Let's take a look at the long-term trend. Analyzing with weekly K-line, copper prices are currently at the fourth adjustment wave level in the falling cycle; at the same time, analyzing with monthly K-line, a giant head-and-shoulders top pattern is forming, so the expectation for a long-term decline increases.
4. Trading Strategy: Tuesday trading strategy: Short position on the main December 2012 contract around 60,800, stop loss 300/ton.
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Lu Yuejian