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Two Ways To Play: Copper Slumps From First to Worst


Strengthen your portfolio in good times and bad.

Copper Loses Luster

Bloomberg reports copper, the best performing industrial metal in 2007, could end up losing this year for the first time since 2001. The metal rallied 26% in the first quarter, and reached a record $4.2605 on May 5. But since then the price has dropped 28% as U.S. growth dimmed.

Copper is the third most widely used metal for, amongst other things, the manufacturing of electrical wire and pipes. One analyst thinks it could drop another 11% to $2.75 a pound as demand continues to slump due to the housing industry.

From the Bull Pen: Gold continues to be the favorite in the commodities sector as it is an inflation hedge and has positive event risk. Bulls can consider the gold ETF (GLD) with near term sell stops below $85.

From the Bear Cave: Copper bears can consider Freeport McMoRan (FCX) with an eye on the $60 level. Will that support level hold? A close below that mark, and bears can expect downside acceleration.

Oppenheimer Bears on Consumer Communications reports research firm Oppenheimer & Co. is downgrading Comcast Corp. (CMCSA) and Sprint Nextel (S) from market perform to underperform because the U.S. is in the midst of a cyclical slowdown in consumer communications.

The firm is downgrading consumer focused companies as it believes the consumer environment will noticeably worsen in the second half of 2008, all while supply increases. Oppenheimer's theme is to avoid consumer stocks but it still overweights lower priced and reasonably positioned companies like AT&T (T), Embarq (EQ), and CenturyTel (CTL).

From the Bull Pen: Is CTL ready to bust out above $40? Near term sell stops can be set in the $37-38 range.

From the Bear Cave: CMCSA's rally Friday was impressive but bears notice the stock was unable to recapture its 50 and 100 day moving averages. Those attempting the downside can set buy stops above that level (near $20.75).

For more ideas in real time throughout the trading day, check out Minyanville's Buzz & Banter.

Quick Check Around the World

Asian trading closed with the Hang Seng -4.29%, Nikkei -1.26% and Sensex -3.87%.

A quick check of Europe finds the CAC -2.97%, DAX -2.85%, FTSE -3.23%

As of 8:15 a.m. EST, S&P Futures are trading -18 points to 1196 and Nasdaq futures are off -28 points to 1646.

A Look At Commodities

Commodities are mostly lower. Crude oil is -4.08 to 102.81. Gold is -1.40 to 881.50. Silver is -0.348 to 13.180, and copper is -11.45 to 297.05.

The dollar index is +1.147 to 78.094.

On the Radar


8:30 Personal Income: 0.2% cons.
8:30 PCE Deflator (y/y): 4.5% cons.
8:30 Personal Spending: 0.2% cons.
8:30 PCE Core (m/m): 0.2% cons.
8:30 PCE Core (y/y): 2.4% cons.

Click here for the full trading radar.

Happy Monday! Good luck today!
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No positions in stocks mentioned.

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