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.

How Will Trump Restore the Dream of the Golden Years?

President Trump has come into office with a tall order at hand to restore faith in our ability to retire on time… or at least come close. But the numbers aren’t in his favor… or ours.

Our new infographic, How Will Trump Restore the Dream of the Golden Years?, dives deep into U.S. retirement figures, to analyze a scary trend in the U.S. and gain perspective on the future of the retirement landscape.

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.