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Copper – Buy, Sell, Hold?

Posted by nexvucapital on April 21, 2013

Other than the severe dip during the financial crisis of 2008/09 and the post-crisis run to $4.50, copper has generally traded in a narrow range between $3.00 and $4.00 since 2007. With the global cost of production currently sitting at ~$2.00 per pound we can conclude that outside of another 2008 crisis a fall below $2.00 is doubtful. Price support over the last six years has been in a band between $2.75 and $3.00. We are of the opinion that any move below $2.75 would be a very short-term selling climax. On this basis, we see the current correction as a test of the $2.75 to $3.00 support band. In this “I hate commodities” environment do not be surprised to see the current selling correction test $2.75 as it did in the Spring of 2010. The Elliott Wave pattern is completing a Down-Wave 4 correction which should be followed by the final Up-Wave 5 buying climax (one needs to be sure they are positioned prior to this event as Wave 5 moves in commodities tend to be the largest move and the Wave 3 move in copper was an amazing +$3.00).

Copper Monthly - April 20 2013

On a fundamental basis, the major copper producers are doing their best to set up the next highs in the red metal:

  • Growth-oriented leadership has been transitioned to slash and cut specialists.
  • CAPEX budgets have been trimmed substantially or terminated.
  • Exploration teams have been eliminated.

On a macro basis, resource nationalism is surging and copper usage continues its steady +100 year 4% per year growth pattern as the BRICs move through industrialization and ramp to the copper per capita usage rates of the developed world.

World_Copper_Usage

World_Copper_Usage_per_Capita

And while you are bottom-feeding – go learn something!

World_Copper_Fact_Book

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