It’s time for a seasonal copper trade, and this ETF is a good entry point for the metal.
United States Copper Index Fund, LP (CPER)
From Stock Trader’s Almanac
Copper has a tendency to make a major seasonal bottom in November/December and then a tendency to post major seasonal peaks in April or May. This pattern could be due to the buildup of inventories by miners and manufacturers as the construction season begins in late-winter to early-spring. Auto makers are also preparing for the new car model year that often begins in mid- to late-summer.
Traders can look to go long a May futures contract on or about December 14 and hold until about February 24. In this trade’s 49-year history, it has worked 32 times for a success rate of 65.3%. After four straight years of declines from 2012 to 2015, this trade was successful three years in a row with increasing theoretical gains. In 2020 the trade was a bust as Covid-19 emerged in China and spread worldwide.
One option that provides exposure to the copper futures market without having to have a futures trading account, is United States Copper. This ETF tracks the daily performance of the SummerHaven Dynamic Copper Index Total Return less fund expenses. CPER’s daily volume can be on the light side, but it does appear to be sufficiently liquid with average daily volume approaching 300,000 shares. Stochastic, relative strength and MACD technical indicators applied to CPER are all beginning to improve.
A position in CPER can be considered at current levels up to a buy limit of $27.20. If purchased an initial stop loss of $24.90 is suggested. This trade will be tracked in the Almanac Investor Sector Rotation ETF Portfolio.
Jeffrey A. Hirsch, Stock Trader’s Almanac, stocktradersalmanac.com, 800-762-2974, November 11, 2021