From Taki Tsaklanos: Base metals are hot again. Interestingly, at the start of 2016, they were still truly in a ‘puke phase’ where investors dumped everything related to base metal investments.
There is even more. It is not only that base metals are soaring and hot among investors, at this very moment, they arrived at a price level which has secular importance. By that, we mean that the current price level is much more important than almost every other moment in time.
For every asset, on every chart, at least 80% of price points are meaningless. Investors should focus on that small percentage of price points which has an above average importance.
The base metals fund, Powershares DB Base Metals Fund ETF (NYSE:DBB), representing the base metals sector, is shown below. Basic chart analysis suggests that the sector is testing resistance of its secular bear market. In other words, if (and that is a big IF) the sector will be able to continue soaring for at least another two weeks, then the long term bear market has turned into a bull market.
The key metals in the base metal sector are the ones presented in below charts. Although not clearly visible on the smaller charts, zinc and copper have the most constructive chart setup on their longer term chart.
Zinc & Copper: 1-year and 5-year price charts
Zinc has broken out to 5-year highs. That is remarkable as in the last 5 years the base metals (and commodities sector as a whole) have gone through a severe bear market.
Copper, though not clearly visible on the chart below, has broken out of its long term bear market this week. The chart in this article visualizes our point. We need another week of copper price trading above $2.50 in order to have a confirmed breakout though, otherwise this will be a so-called ‘false breakout’.
Both base metals look truly great, and playing this hot trend through a miner is certainly a good investment idea.
Aluminium, Lead & Nickel: 1-year and 5-year price charts
Aluminium is very close to break out on its 5-year chart, it needs to rise another 5 to 10%. Its short term chart is very bullish.
Lead is very similar to aluminium.
Nickel is bullish short term, but not yet long term. We would consider this the least interesting base metal at this point.
With the insights in this article, investors know which base metals have the most interesting setup, and which type of miners to look for as enticing investment ideas. Some names that are recommended for further research: Alcoa (AA) as a large cap, Trevali Mining (TV.V) as a small cap, and Frontier Resources in Australia as a mid-cap.
This article is brought to you courtesy of Investing Haven.