Southern Copper Corp (SCCO) has grown quite impressively over the last five months. Can it continue to move up or is it ready to slow down? Why has the stock gone up like it has? Hey copper! Didn't anyone tell you that you are supposed to be performing terribly like commodities? Copper has been rather resilient compared to other sections of the commodities market. Most metals have fallen steeply, but the modest 14% decline by copper may be from its diversity in manufacturing needs. German Larrea of Southern Copper stated that copper inventory has fallen more than 34% and this is good for copper's pricing. All this is showing well for Southern Copper. The company has done well in running itself. With an increase in production by just over 11%, this offset the 14% reduction in copper price, net sales have not dipped that much.
Southern copper Corp, for the quarter ended Sep. 30 (Q3), missed estimates on revenues and beat expectations on earnings per share. For this reason, it falls within the "average" results of all company results.
David White wrote an article recently for Seeking Alpha and expressed concern about the continued momentum of copper's price. He believes copper is set to "drop sharply" when it does break out. He says:
"What really convince me that this may be a downward move are the world economic fundamentals."
EU problems continue to surface. Greece presented its latest austerity package to parliament on Monday November 5, 2012. Greek lawmakers narrowly approved a multibillion-euro austerity package early Thursday in an effort to win more bailout funds, but the measures also threaten to deepen the country's brutal recession and destabilize its fragile politics. Will it last? Despite his call, more than a dozen lawmakers from Mr. Samaras's three-party coalition refused to back the measures in the vote just after midnight-a worrying sign for the coalition's future.
Is congress likely to tackle the fiscal cliff? I have not read much that has supported a "yes" answer to this question. Some say a lame duck congress is not going to do anything. I would think that congress would at least attempt to put it off for another year or even a quarter so the new congress could tackle it. I figure either it will not be tacked or temporarily put off. None of this bodes well for copper prices. There is just too much out there that can influence the economy in a bad way right now. I am expecting the economy to shrink somewhat and copper prices to peak and turn down soon.
Since June the stock has moved up and it has been very strong and healthy. It still looks like it can continue to move up because I am not seeing any signs of a slow down. The RSI indicator continues to levitate above the '50' mark that shows continued strength in its movement and the MACD also continues high above the '0' marker. Both indicators are extremely bullish. It is also using the middle Bollinger Band as support and until it drops below this band, I still perceive the stock will continue up.
So I have two things to consider when I look at this stock. Present observations of the chart make the stock look very strong and I do not see it reversing direction just yet. Current events appear to warn me a coming economic slowdown and this places copper prices right in the middle. Looks like a slow down. So what would my observations conclude? The stock may continue up for a short term but I would expect it to level out and possibly reverse direction within the quarter.