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 ...