Base metals have essentially been the only solace for commodity traders in recent memory thanks to increased demand from anticipated infrastructure spending. It is probably little surprise that, when it comes to metals, most attention flocks to gold and silver, but as you'll see in this article, it could prove strategic for traders to shift their focus to metals such as aluminum and copper instead. (For more, see: Investing in the Metals Markets.)

PowerShares DB Base Metals Fund

Given the rise in popularity of exchange-traded-products, active trader have flocked to names such as the PowerShares DB Base Metals Fund (DBB) rather than buying futures contracts in the underlying commodities. On the chart below, you'll notice that the price is trading near a major level of support. From an active trader's perspective, this is one of the strongest charts in the market because the retracement toward the 200-day moving average (red line) along with the bounce off the support suggests that the bulls are still in control of the momentum. Traders will also look to the recent crossover between the moving average convergence divergence (MACD) and its signal line as confirmation of the resumption of the uptrend, and most will likely protect their long positions by placing a stop-loss order below $15.37 in case of a sudden pullback. (For more, see: Nearby Support Suggests Now Is the Time to Buy Base Metals.)

Technical chart showing the performance of the PowerShares DB Base Metals Fund (DBB) over the past year

Aluminum

Aluminum tends to be one of the most overlooked commodities in the market, and funds such as the iPath Bloomberg Aluminum Subindex Total Return ETN (JJU) tend to be thinly traded. However, as you can see in the chart below, the price tends to move quite predictably near long-term support levels, and the recent crossover between the MACD and its signal line suggest that the bulls are taking control. 

Active traders haven't been able to capture a risk/reward setup like this since late 2016, so you can bet that the bulls will be watching closer over the upcoming sessions to see if the support holds and prices start to head higher again. A bounce from this level would push target prices back above the 2017 high, and it is likely that some would watch for a move toward the 2015 swing high of $19.13. (See also: Top 3 Aluminum ETFs.)

Technical chart showing the performance of the iPath Bloomberg Aluminum Subindex Total Return ETN (JJU) over the past year

Copper

From the standpoint of an active trader who searches the market for optimal risk/reward setups, there are few setups as interesting as the one on the chart of the iPath Bloomberg Copper Subindex Total Return ETN (JJC). The first thing to note is how the 200-day moving average was able to prop up the price after a multi-month retracement. The price near this support suggests that the bulls are still in control of the long-term momentum. Furthermore, the upward slope on the relative strength index (RSI) and the fast stochastic oscillator is regarded as positive divergence and is another sign that the price could be headed higher from here. Like the charts discussed above, the crossover between the MACD and its signal line is also a common buy sign that could generate interest from those who don't tend to invest in copper. (For more, see: Active Traders Are Turning Bullish on Industrial Metals.)

Technical chart showing the performance of the iPath Bloomberg Copper Subindex Total Return ETN (JJC) over the past year

The Bottom Line

Base metals are one segment of the commodity markets that tends to often get overlooked in favor of precious metals such as gold. However, as discussed above, nearby support and bullish crossovers on major technical indicators suggest that this could be a group worth keeping an eye on and that the long-term uptrend could be readying for the next leg higher. (For related reading, see: Now Is the Time to Watch Agriculture and Base Metals.)

At the time of writing, Casey Murphy did not own a position on any of the assets mentioned.

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