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Two Ways To Play: Copper Takes a Dive


Strengthen your portfolio in good times and bad.


According to Bloomberg, copper is quickly becoming the worst-performing metal since the commodities market crashed in July.

Inventories worldwide have more than doubled in the past 4 months as global economies have contracted. The curbed demand for copper isn't helped by a 32% drop in US auto sales -- the worst since 1991 -- and a forthcoming report that could show homebuilders are breaking ground on the fewest homes in at least 50 years. Furthermore, China, the world's largest consumer of copper, is headed for its slowest growth in almost 2 decades.

For added perspective, according to the Copper Development Association, an average of 400 pounds of copper is used in building a single home and 50 pounds is used to build a car.

Year-to-date, copper prices have tumbled approximately 45%.

For more, see Professor Andrew Jeffery's Copper Prices Fall, Deflation Takes Hold.

From the Bull Pen: If you think the market is a discounting mechanism and that commodity prices are near their bottom, consider copper miner Freeport McMoRan (FCX). A sell stop can be set near $22.

From the Bear Cave: For those that believe copper stocks will suffer more downside pain, consider Southern Copper (PCU); one option is to enter on a rally to near $15 and set a buy stop around $16.

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No positions in stocks mentioned.

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