China Ripping? Buy Copper

Have you heard about China?

Chinese stocks just had their best week in history, following the People's Bank of China's (PBOC) announcement of rate cuts, among other stimulative actions.

In July, we talked about Copper and its base and industrial metal peers showing broad weakness. But that seems to be changing...

China is the world's largest consumer of refined copper, so base and industrial metals have benefited from the recent pivot from the PBOC.

Chinese stocks and copper futures have been positively correlated for years:

The 200-day rolling correlation flipped negative earlier this year but is positive again and has recently been screaming higher toward its highest positive correlation in history.

This week, the China Large-Cap ETF $FXI decisively broke a multi-year downtrend line and entered a new primary uptrend.

If the path of least resistance is higher for Chinese stocks, the 29th element should also catch a bid.

Earlier this year, Gold broke out to new all-time highs, but Copper is still in the process of resolving a similar multi-decade accumulation pattern:

Like the 2011 peak was a major level for Gold, Copper is still below its respective 2011 peak.

If this new Gold bull market is for real, we expect Copper futures to eventually resolve this huge base and make new all-time highs.

Let's talk about how we're trading it.

Copper futures are trending higher toward the upper bound of a textbook multi-year accumulation pattern:

If and when this pattern resolves, we expect price to begin a new primary uptrend, and we want to be involved.

We're buying Copper futures on strength above 5, targeting 6.25 and 8.

You could also jump the entry if you have a shorter timeframe: 

Price is testing the 61.8% retracement of the prior drawdown from this summer and looks poised to retest the former all-time high.

We like buying Copper futures on strength above 4.70, with a target of 5.20 and 6 over the coming 3-6 months.

We'll be sure to update you if and when Copper hits six bucks.

COT Heatmap Highlights

• Commercial hedgers added over 14,000 contracts to their net-short Copper position.
• Commercials added over 400 contracts to their largest net-long Bitcoin position in history.
• Commercials added over 800 contracts to their largest net-long Dollar Index position in over 3 years.

Click here to download the All Star Charts COT Heatmap.

Today, we're outlining an electrical equipment and parts stock at the upper bound of an 8-year basing pattern for Trade of the Week: