“It looks like you called the bottom on copper perfectly,” notes fellow Cheap Investor reader, Susan T. “I even bought into the stocks you said may do well and walked with some good gains on Southern Copper and Freeport. Thank you.”
Copper was never going to move much lower than 290. We knew that just by looking at historical support levels over the years. We also knew it fell far too much, far too fast, and that China demand would eventually push it higher.
Nowadays, we expect for copper to move even higher from these levels, as China outlines plans to loosen regulations on financial markets, including an ease on limits on foreign investments, according to ABC News.
As we noted in April 2014:
We’ve been talking about copper for some time now…
After bottoming at 294, we made the call that copper bottomed out. And – so far -- we’ve been spot on, as the metal runs to 304 in just weeks. Even Morgan Stanley believes copper concerns are overdone.
“When it comes to copper, many of the downside risks that people were factoring in are no longer expected,” said a co-manager of BlackRock, as quoted by The Wall Street Journal. “It’s quite an exciting market.”
Copper was never going to fall much more below 294… And we knew that.
Such wildly oversold levels have served as a floor in the past… and they’ve held up considerably well this time, too, as China takes steps to boost its economic growth.
“China’s economic growth may be slowing – to 7.7% last year – but it will still need large amounts of copper to fuel urbanization for its auto industry and to make air conditioners. A major state drive to improve electricity-transmission infrastructure adds to demand,” reports The Wall Street Journal.
Remember, “When things get bloody, beaten, and scarred, every one runs scared. But that’s also when smart investors storm in and “steal” stocks on the cheap.” As we learned from Warren Buffett, “A climate of fear is your friend when investing; a euphoric world is your enemy.”