Trade of the Day: Agnico Eagle Mines Ltd (USA) (AEM)

Copper is particularly oversold and ready to rebound

By Ken Trester, Editor, Power Options Weekly

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My indicators were giving neutral readings for most of the week, unchanged from last week’s readings, but they turned partially bullish at yesterday’s close following the strong performance from stocks on Thursday. However, while the Nasdaq broke out to new all-time highs, the S&P 500 ended right at resistance at the upper end of its trading range at the 2,800 level, and the Dow also closed just below resistance at the 25,000 level.

Although it has been a fairly bullish week, I think there’s about a 60% chance that the market will decline from here and move back down to the bottom of its trading range. A decline here during the middle of summer would be in line with what has happened in the recent past, where we’ve seen stocks fall and volatility rise during the summer months on lower-than-average volume.

Now, if there’s one area of the market that I think still presents bullish opportunities, it would be the commodities.

One commodity I’m monitoring is copper, which has taken a big dive recently. It is said that copper is a leading indicator for the market and, while some think that this means the economy will follow copper to the downside, I think the commodity has been oversold and that it will rebound from current levels.

My recommendation in Agnico Eagle Mines Ltd (USA) (NYSE:AEM) below is one way to play that potential move, as part of its business is involved in exploring for copper deposits, as well as other precious metals like gold and silver:

Buy to open the AEM Nov 50 Calls (AEM181116C0005000) at $1.55 or lower. 

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InvestorPlace advisor Ken Trester brings you Power Options Weekly, which delivers 5 new options trades and his latest trading advice to you each Friday. Trester has been trading options since the first exchanges opened in 1973 with a winning streak that goes back to 1984 with money-doubling average annual profits since 1990.


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