A Stock Hedge in Copper

Equity bears often look to the copper market – affectionately known as “Doctor Copper” – to assess stock prices’ potential future.

Since May, that picture hasn’t looked good.

As U.S. stock markets ratcheted higher this year, copper has fallen. That divergence serves as a note-worthy warning.

Here’s a chart of copper futures this year…

See larger image

After dropping about $0.63 per pound, or roughly 15%, during the first four months of the year, copper found a bottom. Briefly.

A quick dead-cat bounce brought copper prices back up to $3.40, but the bulls couldn’t muster any more than that. As you can see, prices fell back down in short order.

Now, we’ve just watched copper test that overhead resistance zone – between $3.30 and $3.40 – once more. And again, the bulls couldn’t spur a break above this level.

That means the prevailing copper trend is still down. That’s bad news for stocks. And it’s an opportunity to get into a hedge trade at a good price.

Betting against copper, via a short sell, is one way to hedge against falling stock prices. iPath offers an ETF that tracks copper. The ticker symbol is JJC. And it looks to be a good short with an entry between $39 and $41.

Place a stop-loss at the last significant peak of $42 to minimize risk.

The World’s “Safest” Investment is About to CRASH

The one investment you may hold dear to your heart… the one investment that helps you sleep better at night, that you rely on for safety, security, and maybe even profits in a world gone mad… is about to get slaughtered.

When it happens, trillions in wealth will be wiped out virtually overnight!

To find out exactly what this investment is, click here.

Click to Learn More
Categories: Markets

About Author

Adam O'Dell has one purpose in mind: to find and bring to subscribers investment opportunities that return the maximum profit with the minimum risk. Adam has worked as a Prop Trader for a spot Forex firm. While there, he learned the fundamentals of trading in the world’s largest market. He excelled at trading the volatile currency markets by seeking out low-risk entry points for trades with high profit potential. An MBA graduate and Affiliate Member of the Market Technicians Association, Adam is a lifelong student of the markets. He is editor of our hugely successful trading service, Cycle 9 Alert.