Copper ETFs and Copper Stocks Melting Up

Posted by Bigtrends on January 2, 2013 9:53 PM

Copper ETFs and Copper Stocks Melting Up

Copper About To Move Big

With 2012 now behind us it's time to start looking for some new long term investments and option trading ideas which have big potential gains in the new year. Copper is one metal that has caught my eye.

The long term monthly chart of the Copper ETF JJC shows a potential cup and handle pattern accompanied with bullish volume characteristics.  Last year copper traded sideways in a narrowing range.  This type of price action tends to bore traders and investors forcing them to look elsewhere for new to trades. The saying is "If the market doesn't shake you out, it will wait you out"

You can see on the monthly chart that the interest in this commodity diminished.  You can tell because of the sideways movement and declining volume.  I like to focus on investments which are out of favor but are showing signs of another big trend starting.  Getting on the train before it leaves the station can make for a fun ride.

Take a look at the charts, analysis and my best copper stock setup below:

JJC - Copper Total Return ETN Profile

Description: The index includes the contract in the Dow Jones-UBS Commodity Index Total Return ETF (JJC) that relates to a single commodity, copper (currently the Copper High Grade futures contract traded on the COMEX).

JJC Monthly Chart

Copper Miner Stocks ETF (COPX)-  Weekly Chart

This ETF holds a basket of copper mining stocks which is showing signs of a new trend starting.  Take a look at the top holdings stocks and fund breakdown to get a feel for the exposure it provides.

COPX Top Ten Holdings

1. Inmet Mining Corporation (IEMMF): 6.62%
2. KGHM Polska Miedz SA (KGH): 5.24%
3. Xstrata PLC (XTA): 5.04%
4. Grupo Mexico, S.A.B. de C.V. (GMEXICO B): 4.89%
5. Jiangxi Copper Company Limited H Shares (00358): 4.83%
6. HudBay Minerals, Inc. (HBM): 4.82%
7. Antofagasta PLC (ANTO): 4.78%
8. Southern Copper Corporation (SCCO): 4.75%
9. Lundin Mining Corp (LUNMF): 4.55%
10. Kazakhmys PLC (KAZ): 4.55%

COPX Details

COPX Weekly Chart

Best Copper Stock Setup - (LUNMF)

After reviewing the main holdings in this fund I noticed one stock that looks ready to start a new bull market.  Lundin Mining. shares look to be building a Stage 1 base and could break out and start to rally any week.  Keep in mind 3/4 stocks move with the broad market so we do want the major indexes to find a bottom or at least trade sideways if we want copper stocks to start their run.

LUNMF Weekly Chart

Copper Futures, ETF and Stock OptionTrading Conclusion:

Copper has lost its shine over the past 12 months but could start to make headline news in the near future. I like both COPX and LUNMF if we see further strength.

Courtesy of Chris Vermeulen,

Disclaimer:  I currently do not own a position in these investments but plan on buying them in the near future.