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Avoid the Temptation to Buy This Beaten-Down Metal

By Jeff Clark
Tuesday, November 24, 2015

Bargain hunters are getting interested in copper again...
 
In 2011, the price of copper peaked at just more than $4.50 per pound. Today, the metal is trading for just about $2. That's a 55% drop in the past four years.
 
But buying right now would be a mistake...
 
Copper broke down below an important support level last week. It could bounce back up and retest the breakdown level. That would give traders a quick chance to profit. But that would be like trying to pick a penny out of the bottom of a urinal. The reward just isn't worth the risk.
 
You see, the longer-term trend is lower. Copper will be cheaper months from now than where it is today.
 
Take a look at this chart...
 
 
Copper is in freefall.
 
The next significant support level is all the way down around $1.40 per pound. That's 30% below Friday's closing price.
 
We can't rule out a short-term bounce – similar to what we saw earlier this year. But any short-term gains are likely to be followed by sharply lower prices.
 
The best the copper bulls can hope for is a period of consolidation – where the price of copper chops back and forth in a tight trading range for several weeks. The worst case is a move all the way down to the support line of the 2009 low.
 
Neither case offers a compelling reason to buy copper today. Traders should avoid the temptation to buy. You'll likely have a better opportunity in a few more months.
 
Best regards and good trading,
 
Jeff Clark




Further Reading:

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