Copper; A Long Term Opportunity in the making
Men never plan to be failures; they simply fail to plan to
While the majority were panicking and
turning more bearish with the passage of each day, we noted
that copper was giving of an early warning signal of
It is said that the economy usually
mimics the copper markets and upon examining the copper
charts, it appears that the economy and copper are trending
in the same direction. Copper appears now to be closer to a
bottom than a top and hence from this, we can infer that the
markets are also close to putting in some sort of bottom, if
one takes a long term perspective. Copper has a
tendency of putting in a bottom well in advance of the
markets and the economy, and it provides an early warning
signal of a potential change in market direction.
During the last strong correction, which
lasted from 2000 until early 2003, copper put in a bottom
towards the end of 2002, well in advance of the markets and
the general economy. Thus a change in direction here will
provide the first signs of a turn around. If the Dow trades
down to the 7200 ranges and or puts in a new 52 week low,
while copper starts to trend higher, it will be a very
strong long term bullish sign.
Market Update Dec 23, 2008.
After trading as low as 120, copper has
mounted a rather strong come back in a matter of days.
After breaking below the very important support zone of
140.50-142.00, it was able to remarkably trade above it with
ease. Former strong support zones normally turn into very
strong resistance points; its ability to break past it with
such ease suggests that copper has or is very close to
putting in a long term bottom. Copper is one of the first
markets to recover and thus a recovery here would be another
positive sign for the equity markets.
Market update Jan 6, 2009.
It is now giving the first signs of a
long term bottom formation, even though in the short term
there is a possibility it could momentarily spike down to
the 105-110 ranges. From a long term perspective, the
current pattern is indicative of a long term bottom, and
traders would be wise to start looking into the possibility
of taking small bites in some of the key players in this
sector. If, for some reason copper trades down to the 110
ranges, traders should view this as a long term screaming
buy. A close above 160 would significantly diminish the
chances of copper trading down to the 110 ranges.
Published on the 10th of January 2009
The channel formation has moved from the
120-150 ranges to the 140-160 ranges and even though copper
has not yet managed to trade above 150 for 12 days in a row,
the fact that the channel formation is moving higher is a
bullish sign. As a result of the strength in the channel
formation copper now would need to trade above 150 for only
7-9 days, to indicate that the next target is 180. Global
Pulse March 2, 2009
traded past 150 for 9 days in a row and in the process hit
its first upside target of 180 before pulling back. The next
objective for copper would be to trade past 180 for 3-5 days
in a row and in doing so set up a pattern that would trigger
a move up to the 220-240 ranges before a stronger correction
The above chart clearly indicates that
copper is going to run into rather strong resistance at or
around 250; it will take several attempts before copper can
break past this zone of resistance, but once it breaks past
this zone there is virtually no resistance until about 300.
continues to trade well off its lows and a break past 180
will be a very strong confirmation that the Dow could rally
for another 2 months before correcting again. Market
update March 10, 2009
As copper is an early predictor of stock
market and economic strength, continual strength in the
copper markets will indicate that the markets have more
upside potential. Copper did trade and close above 180 so
the 1st sign of additional upside has been given.
The higher copper trades, the stronger the overall market
becomes and if Copper can trade to the 220-240 ranges then
there is a good chance that the Dow could trade past 9000
before the next correction begins.
The 3 year chart also indicates and
further confirms that the 250 price point level is going to
provide some rather stiff resistance down the line. On the
short term time frames copper is expected to rally and test
itís main down trend line; on both the 1 year and 3 year
charts this equates to a price that falls in the 225-250
ranges. Copper appears to have put in a multi month bottom
and is on course to eventually take out its old highs and
put in a series of new multi decade highs; if by some
miracle its recent lows are tested, traders should load the
lorry up on copper. Copper stocks have already moved up very
nicely and if copper hits its suggested targets, most stocks
should easily experience an additional 50% plus in gains.
Letís take a closer look at one of the
main players in copper, FCX.
Through its subsidiary, Phelps Dodge, it
is a copper, Gold, and Molybdenum company. It also has a
very nice global footprint; it has mines in Indonesia, North
America, South America and in Africa. As of Dec 31, 2008,
recoverable and proven reserves totalled 102 billion pounds
of copper, 2.48 billion pounds of Molybdenum, 266 million
ounces of Silver, 0.7 billion ounces of Cobalt and 40
million ounces of Gold.
Its Grasberg minerals district in
Indonesia contains the single largest recoverable copper and
gold reserve of any mine in the world.
It has 5 copper mines, Morenci, Sierrita,
Bagdad and Safford in Arizona, and Tyrone in New Mexico. The
chino mine was placed on care and maintenance in 2008 due to
low copper prices, but will most likely be fully operational
in the not too distant future due to rising copper prices.
It owns two Molybdendum mines in Colorado, the Henderson
Molybdenum mine and the Climax molybdenum mine.
It has a 57.5% interest in the Tenke
Fungurme copper and Cobalt concessions in the Katanga
province of the Democratic republic of Congo.
It has 4 operating copper mines,
Candekaria, El Abra and Ojos del Salado which are located in
Chile and Cerro Verde in Peru.
In Spain through Atlantic copper and
smelting a fully owned subsidiary it smelts and refines
copper. A portion of the copper from its Indonesian and
South American mines are sold to Atlantic copper.
High grade molybdenum is produced at the
Henderson underground mine in Colorado; additional
molybdenum is produced as a byproduct from its North and
South American copper mines.
It is the 2nd largest producer
of copper in the world.
It is the largest producer of Molybdenum
It owns the single largest Gold and
Copper mine in the world.
It has $2.18 per share in cash or put in
another way a total of 872 million dollars and thus is cash
rich, unlike many of its peers in the mining sector.
FCX has already generated several buy
signals on the hourly and daily charts in addition to the
several positive divergence signals it has flashed over the
course of the last 4 weeks. If it can now trade past 42 for
5-7 days in a row it will have a very good chance of testing
the 56-60 ranges before pulling back. The 60-64 ranges
present a very strong zone of resistance, and it will
probably take several attempts before FCX can break through,
but once it achieves a weekly close above 64, it should be
rather smooth sailing to the 82-84 ranges.
broke through its channel formation (18-32) after failing
several times; this of its own is a very bullish
development, but when itís coupled with the above factors
the case for FCX becomes eve more bullish. The main down
trend line in the above 3 year chart falls roughly at 42 and
serves to confirm the pattern the 1 year chart is
projecting. It also clearly indicates that the 64 price
point level is going to present a zone of strong resistance
and that a weekly close above this mark could result in a
move as high as 96.
Copper definitely appears to have put in
multi month bottom and is now on its way to test the 225
ranges and possibly higher. If by some miracle it should
trade down to the 140 ranges again, long term traders should
look at it as an early Christmas gift and load the truck
up. There are many good plays in the copper sector, some of
the small chaps will obviously lock in higher gains on a
percentage basis, but FCX is a good play for those seeking a
blue chip stock that is also a Gold and Silver producer.
Taking a long term perspective copper is
still a bargain; a day will come when its current all time
high will look cheap, so one can imagine how the majority
will feel in the years to come when instead of buying
aggressively, they sat mopping around waiting for the
experts to guide them.
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Arthur Ashe1943-1993, African-American Tennis Player