Over the last 10 years, lead has been traded between $400 and $4000 per tonne on the London Metal Exchange (LME). Because of its toxicity, lead usage restrictions have been decided in different places in the world, which should have weighed on prices. However, lead was the best performing metal on the markets in 2007 because of the huge Chinese demand of batteries and because the market is controlled by a few big groups (72% of world lead consumption is dedicated to batteries for automotive and industry sectors).
In 6 months in 2007 prices doubled. They have been multiplied by 7 in 4 years, with an historical high price on October 15 last year at $3,980 a tonne. However they have been experiencing a large decline since this date. They lost more than70% of their value as a low has been posted in late October this year at $1,140.
The last two weeks, the price action has rebounded by 33% after it has hit the support line (point D on the chart) of the bearish trend started last year. Indeed, this support line goes through the lower lows that have been posted since August 2007 (points A, B and C).
The indicators are bullish as the MACD and the technical Momentum indicator are well-oriented and argue for a further rebound.
However traders like to complete trends before generating a new medium to long-term trend in the opposite way. The bearish completion would occur here if prices fall to $825, which correspond to the low posted in 2005 and would act as a new support basis. Rebounds have already occurred in the past (points B and C especially) but failed to reverse the bearish trend. That’s why it is likely to be one more time a technical rebound that may not end the current long-term decline.
In this scenario the two first resistances will be a test for the current rebound. The first one is just there, around $1,550, as it was the previous low posted in early July (point C). It could be the new high now as traders often fill the gap and then move back in the other direction. The other resistance is around $1,700, for the same reasons: it was the low posted in August.
If the price action fails to breakout those levels, a pull-back towards $1,000 then to $825 is probable.
