Copper: Decline in Short Positions a Potentially Bullish Sign - Blackmont Capital

Blackmont Capital analyst George Topping has identified one potential bullish signal for copper — a decline in non-commercial (or investment) short positions.

As of March 3, there was a net short position of copper contracts on the NYMEX of 24,900. That is down nearly 10% from the end of February, when there was a net short position of 27,300 contracts, or about 680 million pounds of copper. Copper prices also rallied last week as inventories were drawn down.

Mr. Topping wrote in a note to clients:

We expect the NYMEX short positions to continue to fall as holders become less sure of their positions. A temporary copper price rally can result if speculators rush en masse to cover their shorts.

He recommended low-risk exposure to copper through Capstone Mining Corp. (CSFFF.PK), HudBay Minerals Inc. (HBMFF.PK), and Freeport-McMoran Copper & Gold Inc. (FCX).

Comments

[Mad Hedge F...:]

Watch this space. Traders looking for the Next Big Play are keeping a laser like focus on two key commodities. Chinese stockpiling prompted copper to break out of its recent trading range to the upside to $1.70, taking lead producer Freeport McMoran (FCX) up 30% on the week. Crude rose 15% to a high of $46. These impressive moves happened during a week when global equity markets were in complete freefall. This suggests that the bulk of the world’s growth will be in emerging economies, and that the next round of commodity buying will be even more ferocious than the last. Since I believe that the future is all about the ascent of hard assets over paper ones, this is music to my ears.

Mar 10 12:34 PM