20171221-法国巴黎银行-COMMODITY_QUANT_STRATEGY__Copper__An_anticipated_upward_trend_that_is_going_too_fast__go_back_to_short_8页_203kb

Copper Market Analysis Summary

Core Content

This document is a market analysis and trading strategy note from BNP Paribas Brasil S.A., published on 21 December 2017, focusing on the 3-month LME Copper (LMCADS03). The strategy is based on a commodity quant strategy and highlights a tactical short position in copper due to perceived overvaluation.

Key Points

• Historical Performance:

  • Copper prices have shown a strong upward trend since June 2017, with a 25% increase in the 3-month LME contract.
  • The price has reached its highest level since 2014.

• Model Insights:

  • The factor model indicates a -10% dislocation between current market prices and the fair value for 3-month LME copper.
  • The model suggests an upward trend for copper prices in the coming months, but also warns that the appreciation pace may be too rapid in the short term.

• Trading Strategy:

  • Action: Open a tactical short position on 3-month LME Copper.
  • Entry Price: USD 7,071.
  • Allocation: USD 5.3 million equivalent (30 contracts).
  • Initial Target: USD 6,300.
  • Stop Loss: Dynamic stop loss starting at USD 7,600/MT.

• Caveat:

  • Technical Analysis: Not fully supportive of the short trade.
  • Positioning: Current copper positioning and stock levels do not show evidence of an imminent price correction.

Supporting Analysis

• The strategy is based on an updated fair value model and charts 1-3 that compare LME 3-month Copper with model values and projections.
• Chart 3-4 provides a dynamic stop loss simulation, reinforcing the risk management approach for the short trade.

Disclaimer and Legal Notice

• This document is non-independent research and marketing communication under MiFID.
• No Investment Advice: It does not constitute investment, financial, legal, or tax advice.
• Conflicts of Interest: BNP Paribas may have financial interests in the entities or instruments mentioned, and may engage in transactions inconsistent with the views expressed.
• Indicative Pricing: Prices and terms are indicative and not binding. They are based on internal models and may vary significantly from other sources.
• Back-Testing: Performance data may be based on back-testing, which is for illustrative purposes only and does not guarantee future results.
• Confidentiality: The information is provided confidentially and may not be distributed without prior consent.

Regulatory Disclosures

• The document is subject to various legal and regulatory disclosures depending on the jurisdiction.
• It is intended for professional clients and relevant persons as defined under MiFID and other financial regulations.
• No Guarantee of Execution: There is no assurance that a transaction will be entered into on the terms indicated.
• No Prospectus: The document is not a prospectus and does not constitute an offer to sell or purchase any securities.

Contact Information

• Gabriel Gersztein: +55 11 3841 3421 | gabriel.gerszstein@br.bnpparibas.com
• Gustavo Mendonca: +55 11 3841 3445 | gustavo.mendonca@br.bnpparibas.com
• Samuel Castro: +55 11 3841 3492 | samuel.castro@br.bnpparibas.com

Conclusion

The analysis concludes that while copper is expected to continue its upward trend in the medium term, the current price level may be overvalued in the short term. The strategy recommends shorting the 3-month LME Copper contract with a clear entry point, target, and stop loss, while emphasizing the need for caution due to the lack of strong technical support and the potential for market volatility.