Safe Strategies to trade Copper

BREND

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The commodity that I like to trade is copper, not because it is easy to make money, but because I had done a lot of research on this commodity while I was working as a commodity specialist.

Warren Buffett said investors should invest in the business that they understand. In commodity trading I would advise traders to trade in the commodity that they understand.

Copper is an excellent conductor of electricity, as such one of its main industrial usage is for the production of cable, wire and electrical products for both the electrical and building industries.

The construction industry also accounts for copper's second largest usage in such areas as pipes for plumbing, heating and ventilating as well as building wire and sheet metal facings.


Strategy number 1:

Buy the commodities that China needs and sell the commodity that China sells. Copper is mainly found in South America and Australia. Due to construction boom in China, copper has become a hot commodity, so copper is certainly a commodity that China needs.

This has resulted in backwardation for copper. If you do not know what does backwardation means, click here. So when copper is in contango, traders should grab this opportunity by selling far month contract and buying near month contract.

In the spread chart, value above $1 means copper is in backwardation, value below $1 means copper is in contango. Copper was only in contango 3 times since 2003. During that period of times, its best to trade spreads, means betting that copper will move back to backwardation.


Strategy number 2:

To understand commodity, we have to understand the seasonal trend of the commodity. Buying season for copper comes in when after Chinese New Year. That is when China factories start to place buying order for their production.

If you looks that copper chart, copper price always rises after February which is the Chinese New Year period. So traders should buy copper futures 1 - 2 weeks before Chinese New Year.


Both strategies mentioned above are relatively safe and highly profitable. So to equip yourself with this opportunity, you need to open a commodity trading account.

My commodity broker friend told me that he will give special rate to my friends. If you are interested to trade commodities, send an email to me at [email protected].

To view copper chart and spreads, go to my profile.
 
Life Cycle of Copper

Generally I classified copper into three phrases:
Early part of the year, Mid year, and Late part of the year.

Early part of the year => Customers start to order copper for their production, hence we often see copper price rising the uptrend during this period.

That is the time to buy copper futures.

Mid-year => This period is when copper tends to trade sideways. Price of copper relies on the supply side situation.

Supply disruption can be caused by earthquakes in Chile, strike by the miner. In events like this copper producer may have difficulties in fulfilling the demand, thereby pushing copper price higher. However when the strikes are over, or analysts perceive the copper is overpriced by the market, price will fall.

Traders need to identify where is the range of this sideways trading. Then buy at the bottom of the range, and short sell at the peak of the range.

Late part of the year => Towards September or early October, customers will stop ordering new supply of copper, and utilised the remaining copper stocks in their warehouse. This is the period whereby price will be on the downtrend.

That is the time to short sell copper futures.

Currently we are in the mid year, hence I expect copper to trade in sideways. I had identified the range to between $7100 to $8800. Today copper is trading at $7623 per metric ton, which is at the lower end of the range, I expect copper price to rise over the next few weeks.

As long as the trader is able to identify the life cycle of the commodity, he or she will not have much difficulties making money in commodity trading.
 
On Wednesday 20 August, I had written an article Life Cycle of Copper.

In the article I mentioned that we are now in the Mid-year phrase of the copper cycle, and copper price is expected to rise.

At that time copper was trading at $7623/ metric tons, yesterday copper closed at $7854/ metric tons. If you had bought 1 lot of copper and took profit yesterday, your profit will be (7854 - 7623) x 25 = US$5775.

In my article I also written that copper price tends to fall from end September or early October, traders should short copper. If you are interested to tap on this downtrend, you should start open a commodity trading account now.
 

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Oil / Gold ratio going down

Making directional bets can be rather risky in a choppy market like this. Trading spreads may be a safer way to trade. Traders can execute inter-commodity spreads as well as calendar spreads.

Inter-commodity spreads include:
Oil/Gold, Gold/Silver, Oil/Natural Gas, Gold/ Dow Jones

Calendar spreads include:
Buy near month copper and sell far month copper, Buy Winter natural gas and sell Summer natural gas

a) The logic of buying near month copper and selling far month copper is when copper is in contango situation. As this commodity is in a tight situation, contango will eventually turn into backwardation situation. Hence this spread trade will be profitable.

If you do not understand the concept of backwardation and contango, read my article on "Must Know Concepts on Commodities Trading" in my website.

b) The logic of buying winter natural gas is that consumption of natural gas rises in winter season and reduces in summer season.

Inter-commodity spread trade for Oil/Gold
Today I am interested in the inter-commodity spread for Oil/Gold.
Oil / gold ratio chart looks toppish and has started to move downward. I believe this downward movement is sustainable, so the strategy is to sell oil and buy gold.

I had sold 1 lot of supermini oil at 115.00 and bought 1 lot of gold at 822.63.
 
On Wednesday 20 August, I had written an article Life Cycle of Copper.

In the article I mentioned that we are now in the Mid-year phrase of the copper cycle, and copper price is expected to rise.

At that time copper was trading at $7623/ metric tons, yesterday copper closed at $7854/ metric tons. If you had bought 1 lot of copper and took profit yesterday, your profit will be (7854 - 7623) x 25 = US$5775.

In my article I also written that copper price tends to fall from end September or early October, traders should short copper. If you are interested to tap on this downtrend, you should start open a commodity trading account now.



:smart:


Hi Brend


Very informative. I try to base my trading strategies on relative value and look to profit from cross commodity relationships. I see that Copper is traded on different exchanges. Could you tell a little about copper arbing and why the value of lme/comex/shanghai has such large ranges. I thought they would be closer to 0 like Gold or nymex/ice wti?
 
BREND - thanks for education.
I traded a lot of copper in my time and it can be nice trender at times. It is valuable to have deep pockets and a good contact base in that area to maintain profitability.

sqky - I can answer this for you - LME/Come arb is actively traded. Reason you see big price diff is that Comex is c/lb and LME is $/mt. Comex * 22.0462 = LME. Also LME trades 3M date as standard contract and Comex trades H/K/N/U/Z so have to look at LME curve to match delivery dates.
Spread is generally function of warehouse stocks but specs push it around all over the place.
 
:smart:


Hi Brend


Very informative. I try to base my trading strategies on relative value and look to profit from cross commodity relationships. I see that Copper is traded on different exchanges. Could you tell a little about copper arbing and why the value of lme/comex/shanghai has such large ranges. I thought they would be closer to 0 like Gold or nymex/ice wti?

Sorry miss your question, but I think TWI had answered your question well.
 
BREND - thanks for education.
I traded a lot of copper in my time and it can be nice trender at times. It is valuable to have deep pockets and a good contact base in that area to maintain profitability.

sqky - I can answer this for you - LME/Come arb is actively traded. Reason you see big price diff is that Comex is c/lb and LME is $/mt. Comex * 22.0462 = LME. Also LME trades 3M date as standard contract and Comex trades H/K/N/U/Z so have to look at LME curve to match delivery dates.
Spread is generally function of warehouse stocks but specs push it around all over the place.

Sure, keep in contact and exchange trading ideas.
 
Time to buy Copper

In my article "Life Cycle of Copper", I mentioned that we are in the Mid-Year phrase of copper. During this phrase copper tends to trade sideways. Price of copper relies on the supply side situation.

Traders need to identify where is the range of this sideways trading. Then buy at the bottom of the range, and short sell at the peak of the range.

In my view the bottom of the range is around 7000 level and peak of the range is around 8000 level. Currently LME Copper is trading at 7245, rebounding from the support level of 7140. I think its time to buy and ride back up into the range.

But I can only afford to trade Comex mini Copper.

Bought 1 lot of Comex mini Copper Dec08 at 3.268
Stop level at 3.193
Target level at 3.400
Value of 1 point is US$12500
 

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Time to buy Copper

In my article "Life Cycle of Copper", I mentioned that we are in the Mid-Year phrase of copper. During this phrase copper tends to trade sideways. Price of copper relies on the supply side situation.

Traders need to identify where is the range of this sideways trading. Then buy at the bottom of the range, and short sell at the peak of the range.

In my view the bottom of the range is around 7000 level and peak of the range is around 8000 level. Currently LME Copper is trading at 7245, rebounding from the support level of 7140. I think its time to buy and ride back up into the range.

But I can only afford to trade Comex mini Copper.

Bought 1 lot of Comex mini Copper Dec08 at 3.268
Stop level at 3.193
Target level at 3.400
Value of 1 point is US$12500




I spoke to one of the elder statesmen of our lme broking desk and he had this to say on copper....."the copper buying should be done when there is an ‘r’ in the month, particularly to coincide with days when there is a new moon". My immediate response was that he was ticking the p*$$, but on reflection. It actually seemed to tally with your comments!
 
I spoke to one of the elder statesmen of our lme broking desk and he had this to say on copper....."the copper buying should be done when there is an ‘r’ in the month, particularly to coincide with days when there is a new moon". My immediate response was that he was ticking the p*$$, but on reflection. It actually seemed to tally with your comments!

My trading decision is based on fundamental and trading system, let us see how it goes.:LOL:
 
Today copper price rises to 3.300, so unrealised profit is US$400.

I expect copper to trade in a range over the next few weeks because crashing down in October, which is the down season for copper.
 
On 2nd September I had bought 1 lot of Comex mini Copper Dec08 at 3.268, stop level at 3.193, target level at 3.400.

Today copper price rises to 3.347, so unrealised profit is US$987.50.
Value of $1 equals to US$12,500.

I expect copper to trade in a range over the next few weeks because crashing down in October, which is the down season for copper.
 

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You are spot on. Will have a great time along with you. :) am a copper savy . And i trade it in indian markets. Would be starting to do international from this month onwards. Am waiting to sell it and looking towards the fall till november-december. As you mentioned , copper is best for seasonal trade.
 
with chinese copper imports dropping amid a potentially contracting economy , Dollar appreciation, CFTC investigation and the resulting liquidation we are seeing across the board on commodities do you think copper can hold on to current levels?
I think the only supporting factor is that the market seems quite 'short' at the moment and i have seen continued short selling of copper from macro funds over the last week or so. This could result in a spike should we encounter any serious supply disruptions.
But overall the dynamics seem to have changed and for me this is a market to be sold on rallies.
 
with chinese copper imports dropping amid a potentially contracting economy , Dollar appreciation, CFTC investigation and the resulting liquidation we are seeing across the board on commodities do you think copper can hold on to current levels?
I think the only supporting factor is that the market seems quite 'short' at the moment and i have seen continued short selling of copper from macro funds over the last week or so. This could result in a spike should we encounter any serious supply disruptions.
But overall the dynamics seem to have changed and for me this is a market to be sold on rallies.

My next strategy is to short copper in October. At that time copper demand is basically flat, inventory will build up, price will come down.:cool:

You can click on my name (BREND) to checkup my websites for my commodities trading ideas.
 
Commodities Prices Should Move Higher

On 20 August, I had written an article "Life Cycle of Copper".

In the article I mentioned that we are now in the Mid-year phrase of the copper cycle, and copper price is expected to trade in a range between $7100 to $8800. Today London copper is trading at $7200 per metric ton, which is at the lower end of the range, I expect copper price to rise over the next few weeks.

My FX Trading System has signaled that USD is going to weaken over the next few sessions, so this is good news for commodities.

To view my trading journal, click on my name and go to my home page.

Bought 1 lot of Comex Copper mini at 3.240
Stop level at 3.380
Target level at 3.100
Value of $1 is US$12500
 
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