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horgad
1000+ Penny Miser Member
USA
1641 Posts |
 Posted - 11/05/2007 : 12:03:55
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Base Metal Charts
If any of you like folowing charts, you should like how these look. Basically, base metals are starting to look like they are poised for another run-up. The fact that the went down from their highs is, of course, a bad thing, but that fact that they have stabilized at a relatively high level is good thing.
Usually when a base metal bull run ends the metals go down, down, down, down, etc. That is not what these charts look like. So are they building a base for the next run-up? You decide...
Base Metals Technicals 4
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horgad
1000+ Penny Miser Member
USA
1641 Posts |
Posted - 11/05/2007 : 12:23:56
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Leverage
Buying 2.26 cents worth of copper for one cent gives you upside leverage in the copper market without exposing you to increased risk on the downside. Normally when people buy into a leveraged position they have to take the risk both ways. For example, a bet with 2x leverage may make or lose you 100% compared to a normal bet on the same thing that may make or lose you 50%.
So compare a bet on copper versus a bet on a copper penny. For simplicity lets assume that a copper penny is worth 2 cents today.
$1000 invest in Copper Today:
Copper down 50%: you lose 50% or $500
Copper price is flat: you break even
Copper up 100%: you make 100% or $1000
$1000 invest in Copper Pennies Today:
Copper down 50%: you lose nothing
Copper price is flat: you make 100% or $1000
Copper up 100%: you make 300% or $3000 (pennies are now worth 4 cents)
So instead of 100% gain on copper on a 100% move you get a 300% gain on pennies. Even if you subtract out the initial 100% profit when you acquired the penny that is still a 200% gain in your $1000 penny investment vs 100% gain in the copper investment. Thus I would claim that copper pennies purchased below melt give you 2X upside leverage in the copper market over a similar copper investment. |
Edited by - horgad on 11/05/2007 12:25:37 |
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fiatboy
Administrator
912 Posts |
Posted - 11/06/2007 : 01:08:51
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I'm certainly no expert when it comes to Technical Analysis, but it seems to me that starting this winter and into next year, we should see significant gains in base metals prices. Lead has already started, and I think aluminum and copper shouldn't be too far behind. I'm betting that next year's lows---when they eventually come---won't retrace the lows we've seen this year, but rather will build some support for even higher prices down the road. I'm in it for the long run, and though I regard most TA as nothing more than a hocus pocus smoke and mirrors dog and pony show, I have to admit that I don't see things getting much worse.
We shall see...
Good point, btw, regarding leverage!
"Bart, it's not about how many stocks you have, it's about how much copper wire you can get out of the building." --- Homer Simpson |
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horgad
1000+ Penny Miser Member
USA
1641 Posts |
Posted - 11/14/2007 : 12:33:04
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For what it is worth, copper prices are up over 5% today. Chart wise this is a very good thing as any further price erosion would have made the "building a base for the next run up" theory invalid.
However it is still way to soon to say whether or not this is the start of the next leg up... |
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pencilvanian
1000+ Penny Miser Member
USA
2209 Posts |
Posted - 11/14/2007 : 19:31:57
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Very good reasoning Horgad, but you overlooked one thing that makes holding $1000 in copper pennies superior to holding $1000 in the copper market via a copper contract-
redemption of the contract.
The owner of a copper contract either must sell before the contract comes due or allow the contract to come due and take posession of the copper, and pay for the balance owed on the contract.(Commodity contracts only sell for a fraction of the total value of the commodity in question.)
A holder in $1000 in copper pennies just holds the cents for as long as the holder wants, taking a liesurely approach to making a profit.
Again Horgad, great reasoning on your part.
(This applies to other blogs/forums, didn't mean to annoy anyone here with this)
Starve the Trolls, don't feed or encourage them.
Destroy the Moonbat breeding caves.
Moonbat, A winged troll. |
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Ponce
Penny Hoarding Member
Cuba
630 Posts |
Posted - 11/14/2007 : 20:03:53
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Took a peak in my oldest water plastic five gallon container (have five of them) , took out 50 pennies and they all were coper
"If you don't hold it, you don't own it"...Ponce |
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Ryedale
Administrator
USA
523 Posts |
Posted - 11/14/2007 : 23:18:48
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Horgad,
thanks for the nice work on this, do I have permission to place it on my website. This is nice easy "layman" terminology for this activity. Thanks for this great thread.
$1000 invest in Copper Today:
Copper down 50%: you lose 50% or $500
Copper price is flat: you break even
Copper up 100%: you make 100% or $1000
$1000 invest in Copper Pennies Today:
Copper down 50%: you lose nothing
Copper price is flat: you make 100% or $1000
Copper up 100%: you make 300% or $3000 (pennies are now worth 4 cents)
Ryedale
Hoard Copper Pennies,
The market will develop |
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horgad
1000+ Penny Miser Member
USA
1641 Posts |
Posted - 11/15/2007 : 07:01:01
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"...do I have permission to place it on my website?"
Please feel free to use it, no reference required. Thanks for asking. |
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horgad
1000+ Penny Miser Member
USA
1641 Posts |
Posted - 11/15/2007 : 07:15:31
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"copper contracts"
I can't say that I have any experience with them. So I naturally went to comparing physical vs. physical. That being said an example with contracts vs. pennies would probably be a more real-world example as most people would not be investing in physical copper.
Of course contracts are such a different animal than physical it would not be a easy comparison to make. You get huge leverage up and down and also the risk of holding paper. As Ponce likes to say "If you don't hold it, you dont own it." |
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horgad
1000+ Penny Miser Member
USA
1641 Posts |
Posted - 11/15/2007 : 12:46:50
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| So much for yesterday's gains. If copper has a another down day tomorrow, its chart will start to look pretty ugly. |
Edited by - horgad on 11/15/2007 12:47:13 |
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Topic |
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Future worth of the copper penny
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