Posted: 11 Dec 2020 10:50 AM PST
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 14 and hold until about February 24. In this trade’s 48-year history, it has worked 31 times for a success rate of 64.6%. After four straight years of declines from 2012 to 2015, this trade was successful three years in a row with increasing theoretical gains. Last year the trade was a bust as Covid-19 emerged in China and eventually spread to be a global pandemic.
In the following chart, 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 cancelled by Covid-19 triggered shutdowns. But there is light at the end of the Covid-19 pandemic tunnel now that vaccines are becoming available and copper’s rally since its late-March bottom has accelerated in recent weeks. An accommodative Fed, with near zero rates, and the strong possibility of another Federal stimulus bill are also likely to lift copper prices which in turn could boost the shares of the companies that explore, mine and bring copper to market.