Copper has a tendency to make a major seasonal bottom in November/December and then a tendency to post major seasonal peaks in April or May. This pattern could be due to the buildup of inventories by miners and manufacturers as the construction season begins in late-winter to early-spring. Auto makers are also preparing for the new car model year that often begins in mid- to late-summer. Traders can look to go long a May futures contract on or about December 13 and hold until about February 24. In this trade’s 47-year history, it has worked 31 times for a success rate of 66.0%. After four straight years of declines from 2012 to 2015, this trade has been successful the last three years with increasing potential gains.
In the chart below, the front-month copper futures weekly price moves and seasonal pattern are plotted. Typical seasonal strength in copper is highlighted in yellow in the lower pane of the chart. Last year’s seasonal period was essentially text-book perfect. Copper did make a lower low in early-January 2019 compared to December’s low and it rallied to highs in April. Unlike last year, copper appears to have already begun its seasonal rally after bottoming in late-August/early September. A trade deal with China, even a modest improvement such as a Phase 1 deal, could boost confidence and produce a corresponding bump in economic growth. Recent rate cuts by the Fed have translated into lower mortgage rates which could also eventually lead to a better housing market outlook and a corresponding rise in copper.
As always, please use protective buy and sell stops when trading futures and options.
Disclaimer: Trading Futures, Options on Futures, and retail off-exchange foreign currency transactions involves substantial risk of loss and is not suitable for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge, and financial resources. Any decision to purchase or sell as a result of the opinions expressed in the forum will be the full responsibility of the person(s) authorizing such transaction(s). BE ADVISED TO ALWAYS USE PROTECTIVE STOP LOSSES AND ALLOW FOR SLIPPAGE TO MANAGE YOUR TRADE(S) AS AN INVESTOR COULD LOSE ALL OR MORE THAN THEIR INITIAL INVESTMENT. PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS.