Since the beginning of 2011, copper has been a lousy market aside from the occasional position trade. But that tide could be ready to change. This could create an investment opportunity in iPath DJ-UBS Copper Trust Sub-Index ETN (JJC).
COMEX copper futures have dipped beneath 3.000 three times since May 2013 and recovered each time. That appears to be a psychological floor. What particularly jumps out at me is a marked improvement in momentum on an intermediate-term basis. Place that in the context of the 3.000 floor, and the odds of a sustained recovery in this market start to look pretty good.
Getting granular, the momentum oscillator I use is a 13-week simple moving average of the default 14-week relative strength index. The moving average smooths out whipsaws and wiggles that can blur the larger picture. As you can see by the green line at the bottom of the chart, this indicator put in a substantially higher low this year compared with last year, despite a lower low in price. That provides evidence that, at least, the sellers have lost their will.
What I’m looking for now is a sustained advance above chart resistance at 3.328. This would confirm a crowd willingness to buy Copper at higher prices.
The high-risk way to enter this market is to chase the rally that began in mid-June. That would leave me feeling a little uneasy as there isn’t a great place for a stop loss, and it would entail buying into a move that’s already underway. A more conservative course to consider is waiting for the first dip or consolidation after a violation of 3.328. Going this route would mean sacrificing some return.
Stay tuned – I’ll follow up on this market in due time. Good trading and all the best, everyone.
No position in any of the mentioned securities at the time of publication. Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of any other person or entity.
