Wednesday, May 26, 2010

Shorting Freeport (NYSE:FCX), Teck (NYSE:TCK)?

With both Freeport-McMoRan (NYSE:FCX) and Teck Resources (NYSE:TCK) down over 20 percent, it generates the question on whether shorting them is the best strategy in the near term, as there's little happening in the commodity sector to go long with them at this time.

This of course assumes you're a trader. Obviously this doesn't apply if you want to play everything safe, which isn't necessarily bad in this volatile market. But for those who do trade or want to, volatility is always opportunity, and opportunity is here with the mining stocks.

I bring up Freeport-McMoRan and Teck Resources because of their heavy exposure to copper, which should remain under downward price pressure for some time.

Other than gold miners, mining companies will be under pressure in the near-term, and while we must know the company and what they are exposed to as far as specific commodities, the general sector will continue to struggle because of the expected fall in demand for raw materials from Europe and China, and possibly other regions of the world who are concerned over the unknown ramifications of the sovereign debt crisis and depth of the impact of China battling its inflation problem.

With copper being so tied into the housing market, it should struggle until the economic situation stabilizes, which could be some time to come. Freeport and Teck Resources obviously have strong exposure there, and any other miner that does we should keep that in mind about.

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