Copper ETFs and Copper Stocks About to Move Big

By Chris Vermeulen  JAN 02, 2013 8:59 AM

Copper has lost its shine over the past 12 months, but could start to make headline news in the near future.

 


With 2012 now behind us, it's time to start looking for some new long-term investments that have big potential gains in the new year. Copper is one metal that has caught my eye.

The long-term monthly chart of the iPath Dow Jones UBS Copper Total Return Sub-Index ETN (NYSEARCA:JJC) shows a potential cup and handle pattern accompanied by bullish volume characteristics. Last year, copper traded sideways in a narrowing range. This type of price action tends to bore traders and investors forcing them to look elsewhere for new to trades. The saying is, "If the market doesn't shake you out, it will wait you out."

You can see on the monthly chart that the interest in this commodity diminished. You can tell because of the sideways movement and declining volume. I like to focus on investments that are out of favor but are showing signs of another big trend starting; getting on the train before it leaves the station can make for a fun ride.

Take a look at the charts, the analysis, and my best copper stock setup below.

iPath Dow Jones UBS Copper Total Return Sub-Index ETN Profile

Description: The index includes the contract in the Dow Jones-UBS Commodity Index Total Return (NYSEARCA:DJP) that relates to a single commodity, copper (currently the Copper High Grade futures contract traded on the COMEX).


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Global X Copper Miners ETF (NYSEARCA:COPX): Weekly Chart

This ETF holds a basket of copper mining stocks, which is showing signs of a new trend starting. Take a look at the top holdings stocks and fund breakdown to get a feel for the exposure it provides.

COPX Top Ten Holdings
  1. Inmet Mining Corporation (PINK:IEMMF): 6.62%
  2. KGHM Polska Miedz SA (PINK:KGHPF): 5.24%
  3. Xstrata PLC (LON:XTA): 5.04%
  4. Grupo Mexico, S.A.B. de C.V. (PINK:GMBXF): 4.89%
  5. Jiangxi Copper Company Limited H Shares (HKG:0358): 4.83%
  6. HudBay Minerals, Inc. (NYSE:HBM): 4.82%
  7. Antofagasta PLC (LON:ANTO): 4.78%
  8. Southern Copper Corporation (NYSE:SCCO): 4.75%
  9. Lundin Mining Corp. (PINK:LUNMF): 4.55%
  10. Kazakhmys PLC (LON:KAZ): 4.55%





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Best Copper Stock Setup:  LUNMF

After reviewing the main holdings in this fund, I noticed one stock that looks ready to start a new bull market. Lundin Mining's shares look to be building a Stage 1 base and could break out and start to rally any week. Keep in mind that three-fourths of stocks move with the broad market so we do want the major indexes to find a bottom or at least trade sideways if we want copper stocks to start their run.


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Copper Futures, ETF, and Stock Trading Conclusion

Copper has lost its shine over the past 12 months, but could start to make headline news in the near future. I like both COPX and LUNMF if we see further strength.

Editor's Note: Chris Vermeulen offers more content at his sites, TheGoldAndOilGuy.com and Traders Video Playbook.
No positions in stocks mentioned.

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