Just more than two years ago, copper was selling for $1.30 a pound and large speculators were short more than 27,000 contracts. At the time, this was the biggest short position large speculators had built up in a five-year period.
Fast-forward to the present and copper is selling for $4.34 a pound and large speculators have built the largest long position they have had in the last five years with more than 30,000 contracts net long.
During the last few months, we have seen gold drop after large speculators got too optimistic and hit a five-year high in net long positions.
Now copper is hitting the same kind of level of optimism.
Copper traders would be wise to observe what has happened to other metals when large speculators have hit levels of optimism that are too high based on five-year charts. In the case of copper, the current net long position is twice as high as the second highest level.
Don’t be surprised if copper sees a correction during the next few months.
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