Two Worlds Have Started to Collide for Our "Red Metal" Trade

Yabor City, Fla., has always captivated me.

This historic neighborhood in Tampa is Cuba meets the "Deep South."

It has the energy of Cuban music mingled with laid-back southern charms.

I got to know the area well back in my days as a chemical engineer with DuPont after making dozens of trips out to two prospective water desalination projects nearby. You know you spend too much time in a place when the Airport Marriott staff knows you by name...

100 years ago, this "city within a city" was the cigar capital of the world, producing 500 million cigars a year - even more than Havana did at the time.

Even though the area has seen some hard times since the demise of the cigar industry, it still emits an energetic vibe that attracts thousands of visitors each year.

I mention Yabor City today because it has an interesting parallel to our copper play - Hudbay Minerals Inc. (NYSE: HBM).

Just like the Cuban/southern fusion that first drew me to Yabor City, two worlds have started to collide for this mining stock - fundamental and technical.

And today we're going to take a look at how this unique intersection creates a profit sweet spot for our favorite "red metal" play...

Fundamentals Point to "Yes"

Copper is one of the most versatile materials on earth.

However, like most commodities, this illustrious "red metal" had a long-term down cycle from its peak in early 2011 as we can see in the chart:


When we originally recommended this Canadian-based miner, we did so in hopes that it would be a direct beneficiary of the uptick in demand for copper during the hurricane restoration efforts in areas like Texas and Florida.

But we also mentioned that 10-Minute Millionaires should keep an eye on China as well.

And for good reason.
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A large part of the boom/bust cycle in commodities has been driven by the China economic growth story.

And the "boom" we saw early this week was no different.

On Monday, copper surged above $7,000 a metric ton for the first time since 2014 after reports that China's producer price index had beaten expectations began to surface.

"Copper's been so strong," said Richard Fu, head of Asia-Pacific sales at Amalgamated Metals Trading Ltd. in London. "The Chinese PPI numbers were much better than expected, and they come after some very good growth figures from places like the U.S., Korea, and Germany."

The gains in metal prices offer a bullish backdrop as China's political elite gather in Beijing for the 19th Party Congress this week.

Traders are pricing in good news for industrial metals coming from this important meeting - and that will certainly lead to more volatility in prices over the coming days.

...And Technicals Align

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In September, both copper and Hubday both experienced a pullback.

Hudbay's stock took a beating after the firm announced that they were raising investment capital by issuing 24 million new shares of the stock.

But what a lot of investors didn't realize is that Hudbay raised that capital for a very positive reason - expansion.

The company is developing three different brownfield expansion projects in Lalor, Pampacancha, and Rosemont, Ariz.

To not be financially strapped, the company raised capital through the stock issuance to make sure they didn't run too tight on cash during this expansion phase.

Fortunately, the emotion-driven pullback opened the door to a beautiful Momentum Continuation Extreme for us to target:


After a strong technical entry into this trade, Hudbay's price has continued to move to the upside, even though the shares have come back down to earth a little bit after receiving a nice boost on Monday.

For the time being, let's keep our original instructions in place. Here's a quick reminder:

Since we are expecting the stock to resume its summer run-up, we "Framed our Trade" with an initial stop-loss at 15% below our entry.

We plan to "Book the Profits" on the first half of our shares when the price goes up 30%, which provides a great 2-to-1 reward-to-risk ratio on this trade.

After that, we'll let the second half of your shares run.

Here's how the fully framed trade looks on the chart...


As we monitor this trade going forward, expect more volatility to come into play.

The important thing to remember is that Hubday is still well positioned to profit as copper continues its price recovery.

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The post Two Worlds Have Started to Collide for Our "Red Metal" Trade appeared first on 10 Minute Millionaire.

About the Author

D.R. Barton, Jr., Technical Trading Specialist for Money Map Press, is a world-renowned authority on technical trading with 25 years of experience. He spent the first part of his career as a chemical engineer with DuPont. During this time, he researched and developed the trading secrets that led to his first successful research service. Thanks to the wealth he was able to create for himself and his followers, D.R. retired early to pursue his passion for investing and showing fellow investors how to build toward financial freedom.

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