#$cupm

Copper has a tendency to make a major seasonal bottom in December and then a tendency to post major seasonal peaks in April or May (shaded in yellow below). This pattern could be due to the buildup of inventories by miners and manufacturers as the building 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 23. In this trade’s 43-year history, it has worked 28 times for a success rate of 65.1%. This trade has produced gains in ten of the last fourteen years. Losses were in 2006 (end of housing bubble), 2012 (copper peaked in February), 2013 (peaked in late December as emerging market growth slowed) and 2014 (bottomed in January 2015).

Cumulative profit, based upon a single futures contract excluding commissions and fees, is a respectable $69,400. Slightly more than one-fourth of that profit came from 2007, as the cyclical boom in the commodity market magnified that seasonal price move. However, this trade has produced other big gains per single contract, such as a $14,475 gain in 2011, and even back in 1973, it registered another substantial $9,475 gain. These numbers show this trade can produce big wins and big losses if not properly managed. A basic trailing stop loss could have mitigated many of the losses.