Copper prices have been rising for several months and investors have been flocking to all things related to the industrial metal. There are several possible reasons for the rise in price, including dollar weakness, fears of inflation and even hopes of a strengthening economy. There are currently no ETFs physically backed by the metal, but there are a couple that track miners. Global X Copper Miners ETF (NYSE:COPX) and iPath DJ-UBS Copper (NYSE:JJC) are both trading near all-time highs and offer investors an alternative to trading an individual stock in this group.
However, looking to some of the individual names, there are many that have been showing incredible strength and could continue to rise with the metal. Freeport-McMoRan Copper & Gold, (NYSE:FCX) for instance, has doubled in just the past five months. Over the past two years, FCX has actually rallied approximately 100 points from its December 2008 low of $15.70. Despite the incredible run in FCX, the stock is showing few signs of weakness. It recently cleared a small consolidation, and is trading near all-time highs. The $110 level should be watched as the most recent breakout level for support on any weakness. Looking above, traders should monitor just above $127 as a possible level of significant resistance. This level coincides with all-time highs, and is where FCX topped out in the last bull market.
Southern Copper Corporation (NYSE:SCCO ) is a copper stock already testing all-time highs. SCCO has also experienced a sharp rally from its summer lows and is currently in a consolidation between the $40 and $47.50 level. It already cleared a smaller channel it was following within the base and is now attempting to clear its base. SCCO already poked above the base; traders should watch to see if SCCO can hold above $47.50 in the near term.
Encore Wire Corporation (Nasdaq:WIRE) is a copper stock that is in the midst of a breakout. WIRE was late to the breakout party earlier this fall, as it continued to consolidate while its peers were rallying. However, it finally cleared stiff resistance near $22 and has followed through nicely. WIRE may be a little extended for traders looking to initiate a position, but it should be monitored as a possible candidate for buying on a pullback. (For more, see The Anatomy Of Trading Breakouts.)
Lihua International (Nasdaq:LIWA) is a Chinese copper stock showing an interesting pattern. LIWA cleared an important level near $9.50 in October and rallied into the $13 level in a few weeks. It has since been trading in a consolidation and is now attempting to break out of this pattern. Traders should monitor the $13 level, as LIWA has struggled with clearing this level in the past; a move above it would take LIWA to all-time highs.
While the trend in copper stocks is well underway, they remain worth watching for traders, as copper may have room for even higher prices. If it continues on its trend, the miners should be the primary beneficiaries. Traders shouldn't chase stocks that are extended, but these stocks are definitely worth watching for possible buying opportunities. (For more, see Taking A Shine To Copper.)
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At the time of writing, Joey Fundora did not own shares in any of the companies mentioned in this article.