Back in April we covered the breakout in Southern Copper (SCCO) from $116 a share. It traded as high as $129.80 and since then has come back to the breakout level. I think it can hold that support again and, along with underlying copper futures, mount another attack on the highs. Before we take a look at the specific analysis of the company, let’s focus on the underlying base metal itself. Copper has a “ton” of tailwinds behind it being a key input to the ongoing transformation to clean energy with use in batteries, solar thermal heating and cooling systems, wind turbines, generators, etc. Further, as Nvidia CEO Jensen Huang said on a recent conference call referring to generative AI, “We’re entering the next industrial revolution.” If we are in fact we’re in the next industrial revolution we’re going to need wiring, a lot of it. Copper demand just recently exceeded 25 million metric tons this year and with the explosion in AI and with the move towards clean energy, copper demand is expected to reach 40 million metric tons in the next 15 years. Combine that with the mining issues, as well as geopolitical barriers, in South America, and supply is tight. On the other hand, China has recently been accountable for about half of the world’s copper demand and with their sharp economic downturn recently their consumption will likely slow. However, we see overall demand for copper to remain robust. Turning to the technicals we see price broke from a triangle consolidation that began in 2022 and rallied sharply to a high of about $5.21. Prices have pulled back sharply, but we are entering a zone of Elliott Wave and Fibonacci support from $4.54-$4.39. We expect this zone to offer a floor of support setting up the next push higher. Turning to our focus stock, Southern Copper (SCCO), the chart is also pulling back into a very similar correction with anticipated support in the $115-$105 zone. If we show signs of a reversal I will look to increase our allocation of SCCO in our dividend portfolio at Inside Edge Capital. Southern Copper beat their top and bottom line earnings estimates for Q1 in April, and looking ahead the growth is expected to continue. Earnings are expected to grow by 27.55% in 2024 vs 2023, and then again by 19.33% in 2025. I find the best setups are when the technicals are confirmed by the underlying fundamentals. -Todd Gordon, founder of Inside Edge Capital, LLC DISCLOSURES: (Gordon owns SCCO personally and in his wealth management company Inside Edge Capital Management, LLC Charts shown are MotiveWave.) THE ABOVE CONTENT IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY . THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL’S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. Click here for the full disclaimer.
https://image.cnbcfm.com/api/v1/image/107405036-1713876301247-gettyimages-2147921962-SERBIA_COPPER.jpeg?v=1717518646&w=1920&h=1080
Source link
