Copper prices staged an unexpected rally in the last week on no real news. Hopes of a trade agreement between the U.S. and China, which have gone up and down over the last year, may explain the metal’s rally. This rebound may prove short-lived.
On Sep. 13, copper prices enjoyed a 30% bounce that began on Aug. 27.
Easing trade tensions are fueling the two-week-long recovery. But trading on hopes and guesses may or may not pay off. China decided to lift tariffs on a few items as a sign of goodwill. The U.S. responded by doing the same. This cat-and-mouse game is hardly guaranteeing a trade resolution but was enough to reward stockholders of Freeport-McMoran (NYSE:FCX).
Ever since FCX stock peaked in May at above $14, the downtrend is limiting the stock’s ability to break-out to the upside. Until a deal is firm, traders are merely guessing. Besides, valuations are not compelling at all. Freeport trades at an 18 times P/E, though its balance sheet is improving with debt/equity falling.
Takeaway
Wait for energy prices to firm up and for trade negotiations to improve before investing here. Trade FCX stock in the meantime.
