“We also see that the XLB is trading in a consolidation pattern over the last few weeks. It appears right now to be a double top. This pattern confirms at $36.40. If it closes below that level the target is $35,” she said. “Overall, I would say the XLB looks vulnerable to maybe a 5 to 10 percent decline, and, again, this probably reflects some sort of worries about the economy.”
The trend shows up in copper, too, she added.
Also vulnerable to a breakdown is Freeport-McMoRan.
Doolittle said the charts showed “a bearish descending triangle” right on top of its 50-day moving average.
“If that pattern confirms with a close of $42, the target’s $35,” she said. “It really looks like it could drop to that level pretty quickly, probably on worries of slowing growth out of China and perhaps even building inventories in copper.”
Trader Joe Terranova noted that Freeport-McMoRan had been a proxy play on copper over the past few years.
“We even called it an ETF,” he said, adding that buying interest in the company’s stock might have been replaced by an actual copper ETF, CPER. “That’s your copper ETF trade.”