With copper down sharply over the past month or so, should you play it for a bounce?
Dan Dicker of MercBloc says there are three key factors commodities traders must consider when looking at copper - two are bearish and one bullish.
- The Chinese have removed letters of credit against inventories on copper. That's a big deal, says Dicker, because food suppliers and clothing makers had been buying copper to get these cheap letters of credit.
- Copper had made a steady high between $4.20 and $4.45 for more than 6 months and now that has fallen off the table, the price action probably won't be a 'V'. Historically this kind of price action results in commodity prices bouncing along the bottom.
- Street chatter suggests $3 is the bottom and at that level China will buy until it hurts
But even if China is an aggressive buyer at $3, Dicker says the negatives outweigh the positives. Therefore, "this is a commodity that I don't want to be long. If anything I'd rather be short. And that includes miners such as FCX.
Check out our entire conversation with Dan Dicker. Watch the video now!
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Trader disclosure: On Oct 13, 2011, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Najarian owns long call spreads AMZN; Najarian owns long call spreads AAPL; Najarian owns long call spreads GOOG; Najarian owns long call spreads RIMM; Najarian owns long call spreads WHR; Najarian is long CME; Najarian is long CBOE; Najarian is long CIGX; Adami Owns (AGU); Adami Owns (C); Adami Owns (GS); Adami Owns (INTC); Adami Owns (MSFT); Adami Owns (NUE); Adami Owns (BTU); Terranova is long vrts; Terranova is long lqd; Terranova is long MUB; Terranova is long FCX; Terranova is long TBT; Terranova is long OXY; Terranova is long HOS; Terranova is long F; Terranova is long LULU; Terranova is long CAT; Terranova is long AXP; Terranova is long AAPL; Terranova is long OIH; Terranova is long EMC; Terranova is long WFC; Terranova is long IBM; Terranova is long Silver Dec $40 puts; Finerman owns AAPL; Finerman owns BAC; Finerman owns GOOG; Finerman owns JPM stock leaps & puts; Finerman owns GDX; Finerman owns MSFT; Finerman’s firm owns AAPL short calls; Finerman’s firm owns MSFT; Weiss is long NIHD; Weiss is long JPM; Weiss is long QCOM; Weiss is long SSO; Weiss is long KO; Weiss is long RIMM; Weiss is long HPQ
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