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3 Reasons To Position For A Rebound In Copper


  • A period of consolidation.
  • Reason one: inventories.
  • Reason two: trade and China.
  • Reason three: technical resistance and the dollar.
  • DBB could be the best bet.
  • Looking for more? I update all of my investing ideas and strategies to members of Hecht Commodity Report. Get started today »

Copper found a bottom at $1.9355 per pound on the nearby COMEX futures contract in January 2016. The price action in the red metal which is a barometer for global economic growth then went on a run to the upside. The price of copper made higher lows and higher highs reaching a peak at $3.3220 per pound in December 2017.

For the first half of 2018, the price mostly remained above the $3.00 per pound level and in June the threat of a strike at the Escondida copper mine in Chile to within 0.65 cents of the December 2017 peak. Copper failed to make a new high when it ran out of upside steam at $3.3155, and the price of the base metal began to slide to the downside. A strong dollar, rising U.S. interest rates, and concerns over the escalating trade dispute between the United States and China weighed heavily on the price of copper and other nonferrous metals and industrial commodities. Copper declined to a low of $2.5520 on the continuous futures contract in-mid-August as the dollar index rose to a new and higher high.

Copper is the leader of the pack when it comes to the base metals that trade on the London Metals Exchange. The most liquid nonferrous metals on the LME tend to be copper, aluminum, and zinc and the Invesco DB Base Metals ETF product (NYSEARCA:DBB) reflects the price performance of the three metals.

A period of consolidation and less sensitivity to the dollar

The decline in the price of copper ended a bull market run that had been in place since the bottom at $1.9355 per pound in early 2016. On the way to the downside this summer, the price of copper fell through levels of technical support like a hot knife through butter. Perhaps the most

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This article was written by

Andrew Hecht profile picture
Weekly commodities commentary and calls, from a Wall Street veteran
Andy Hecht is a sought-after commodity and futures trader, an options expert and analyst. He is the #2 ranked author on Seeking Alpha in both the commodities and precious metals categories. He is also the author of the weekly Hecht Commodity Report on Marketplace - the most comprehensive, deep-dive commodities report available on Seeking Alpha.

Andy spent nearly 35 years on Wall Street, including two decades on the trading desk of Phillip Brothers, which became Salomon Brothers and ultimately part of Citigroup.

Over the past two decades, he has researched, structured and executed some of the largest trades ever made, involving massive quantities of precious metals and bulk commodities.

Andy understands the market in a way many traders can’t imagine. He’s booked vessels, armored cars, and trains to transport and store a broad range of commodities. And he’s worked directly with The United Nations and the legendary trading group Phibro.

Today, Andy remains in close contact with sources around the world and his network of traders.

“I have a vast Rolodex of information in my head… so many bull and bear markets. When something happens, I don’t have to think. I just react. History does tend to repeat itself over and over.”

His friends and mentors include highly regarded energy and precious metals traders, supply line specialists and international shipping companies that give him vast insight into the market.

Andy’s writing and analysis are on many market-based websites including CQG. Andy lectures at colleges and Universities. He also contributes to Traders Magazine. He consults for companies involved in producing and consuming commodities. Andy’s first book How to Make Money with Commodities, published by McGraw-Hill was released in 2013 and has received excellent reviews. Andy held a Series 3 and Series 30 license from the National Futures Association and a collaborator and strategist with hedge funds. Andy is the commodity expert for the website about.com and blogs on his own site dynamiccommodities.com. He is a frequent contributor on Stock News- https://stocknews.com/authors/?author=andrew-hecht

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

The author always has positions in commodities markets in futures, options, ETF/ETN products, and commodity equities. These long and short positions tend to change on an intraday basis.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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