Commodities have mostly been on a rough ride recently. However, there is one oversold and beaten-down metal, which is finally rallying.
It is clearly flashing a buy signal and a snap-back trade could surely add some gains to your account. The metal I’m talking about is copper. Although the charts are not really showing a complete reversal that can bring about a 5-year rally, that doesn’t mean that you shouldn’t take advantage of potential short-term gains.
As mentioned earlier, commodity markets are a mess these days. You’ll find busted charts, commodities hitting multi-year lows and broken trades. Yet after 6 years of losses, copper is finally springing back from the dead.
Starting 2001 to 2011, prices of the metal surged over 620 percent, with spot copper reaching almost $4.50. However, the commodity boom has been calming for years now, leading copper to slump just like the rest.
The most recent plunge started in May, and 4 months later, the metal has fallen over 20%. By August, copper dropped more than 50 percent from its high, nosediving to 6-year lows. It is not surprising that most investors and market observers can’t stand copper charts.
However, market players should start paying attention to this metal as the charts are indicating it might have reached its bottom in the previous month.
While most traders and investors were looking at the recent relief rally in stocks, copper has surged by more than 5 percent. This is a significant price movement and it can definitely be the beginning of a surge higher.
Today, copper futures stayed near the previous session’s 7-week high, as downbeat inflation data in China fueled speculation that policy makers will release additional stimulus for the world’s largest copper consumer.
I don’t really think that the market will skyrocket back to its highs in 2011 soon. However, I believe that a strong oversold rebound is definitely in the cards. Knowing that, it could also push some mining stocks to go berserk to the upside.