Commodity Trader's Almanac 2O11

48

COPPER TOPS IN MAY

Copper prices tend to peak out when construc-

tion season is underway. Supplies have built up,

but demand tends to decline. Producers have a

tendency to ship inventories when prices are

the highest during periods of strong demand

(page 149). However, builders order hand-to-

mouth rather than stockpile copper tubing for

plumbing installations when prices get too high.

This could be one explanation for this short term

seasonal tendency.

Traders can look to sell copper on or about

May 11, and then exit on or about May 31. This trade

has racked up 23 wins out of the last 37 years.

Impressively, 2007 and 2008 totaled $10,163 in

profits. However, the global economic rebound

and growth in China in 2009 created a demand

spike causing copper prices to rise during this

seasonally weak period.

Nevertheless, at press time in 2010, this

trade came right back to life, as copper prices

declined on schedule, creating another win for

this seasonal trade. Always evaluate technical

timing indicators, macroeconomic trends, and

fundamentals before executing any trade, espe-

cially seasonal trades.

Besides selling a futures contract, one way

to capitalize on this event is to look at iShares

DJ US Basic Materials (IYM), which contains

natural resource companies that mine iron ore,

aluminum, and, of course, copper among other

metals. Notice the striking similarities of the

seasonal tendencies between the price moves of

this ETF in relation to the price of copper. See

pages 133–138 for additional correlated trades.

Chart courtesy TradeNavigator.com

COPPER (HG) BARS AND ISHARES DJ US BASIC MATERIALS (IYM) CLOSES

(WEEKLY DATA JANUARY 2009–MAY 2010)

ENTRY EXIT PROFIT/

YEAR DATE CLOSE DATE CLOSE LOSS

1973 5/10 65.90 5/30 71.05 – $1,288

1974 5/10 129.80 5/30 107.50 5,575

1975 5/12 55.30 5/30 54.70 150

1976 5/12 71.30 6/01 69.70 400

1977 5/11 66.00 5/31 60.40 1,400

1978 5/10 59.50 5/30 65.90

–1,600

1979 5/10 85.10 5/30 79.40 1,425

1980 5/12 88.60 5/30 93.40

–1,200

1981 5/12 82.10 6/01 81.50 150

1982 5/12 72.95 6/01 61.50 2,863

1983 5/11 80.80 5/31 78.35 613

1984 5/10 63.70 5/30 64.15

–113

1985 5/10 65.50 5/30 60.75 1,188

1986 5/12 63.90 5/30 63.10 200

1987 5/12 66.95 6/01 66.90 12

1988 5/11 94.40 5/31 91.30 775

1989 5/10 122.50 5/30 114.50 2,000

1990 5/10 118.40 5/30 111.50 1,725

1991 5/10 102.25 5/30 96.65 1,400

1992 5/12 101.10 6/01 102.30

–300

1993 5/12 82.25 6/01 80.40 462

1994 5/11 98.00 5/31 103.75

–1,438

1995 5/10 124.25 5/30 130.50 –1,563

1996 5/10 124.50 5/30 115.50 2,250

1997 5/12 113.30 5/30 119.10

–1,450

1998 5/12 79.30 6/01 75.95 837

1999 5/12 71.00 6/01 63.50 1,875

2000 5/10 82.85 5/30 81.15 425

2001 5/10 75.95 5/30 76.25

–75

2002 5/10 73.85 5/30 75.20 –338

2003 5/12 75.20 5/30 78.25 –762

2004 5/12 118.75 6/01 129.25 –2,625

2005 5/11 144.25 5/31 145.65 –350

2006 5/10 368.80 5/30 367.40 350

2007 5/10 356.65 5/30 330.35 6,575

2008 5/12 374.95 5/30 360.60 3,587

2009 5/12 208.60 6/01 231.90

–5,825

37-Year Gain $17,313

MAY SHORT COPPER (JULY)

TRADING DAY: 8—HOLD: 13 DAYS

Copper Seasonal Pattern since 1972

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MONDAY

2

TUESDAY

3

WEDNESDAY

4

THURSDAY

5

FRIDAY

6

SATURDAY

7

SUNDAY

8

“Sell in May and go away.” However, no one ever said it was the beginning of the month.

— John L. Person (Professional trader, author, speaker, Commodity Trader’s Almanac,

nationalfutures.com, 6/19/2009, b. 1961)

Sell stocks whenever the market is 30% higher over a year ago.

— Eugene D. Brody (Oppenheimer Capital)

Those that forget the past are condemned to repeat its mistakes,

and those that mis-state the past should be condemned.

— Eugene D. Cohen (Letter to the Editor Financial Times, 10/30/06)

During the first period of a man’s life the greatest danger is not to take the risk.

— Soren Kierkegaard (Danish philosopher, 1813–1855)

Doubt is the father of invention.

— Galileo Galilei (Italian physicist and astronomer, 1564–1642)

Start Short Cattle(V)—61.8% Accuracy Since 1976—End Jun. 15—Page 44

Motherʼs Day

MAY

FN:

SB(K)

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