Southern Copper Surges 5.8% on Bullish Momentum Amid Copper Market Frenzy

Summary
• Southern Copper (SCCO) rockets 5.8% to $169.91, hitting its 52-week high of $170.40
• Analysts flag overvaluation via DCF and P/E metrics, yet demand for copper fuels optimism
• Options chain shows aggressive call buying, with SCCO20260116C170 seeing 290% price change
• Sector peers like Freeport-McMoRan (FCX) also rally, signaling broader copper market strength

Today’s explosive move in Southern Copper reflects a perfect storm of technical momentum, sector-wide copper demand, and speculative positioning. With the stock trading near its 52-week peak and options volatility surging, investors are betting on sustained strength in the red metal amid global electrification trends.

Valuation Divergence Fuels Short-Term Optimism
Southern Copper’s 5.8% intraday surge stems from a stark disconnect between its current valuation and fundamental metrics. A DCF analysis suggests the stock is 65% overvalued relative to intrinsic value, while its 34.5x P/E ratio exceeds both industry and peer averages. However, rising global copper demand—driven by EV infrastructure, renewable energy projects, and AI-driven data centers—has created a speculative frenzy. Analysts at Itau BBA and Wells Fargo have raised price targets to $144 and $137, respectively, while short-term options activity indicates aggressive bullish positioning ahead of the January 16 expiration.

Copper Sector Rally Gains Steam as Freeport-McMoRan Soars
The copper sector is experiencing a synchronized rally, with Freeport-McMoRan (FCX) surging 4.4% intraday. This momentum is fueled by a global supply deficit, with the LME copper price hitting $13,240/ton—a 35% year-to-date gain. SCCO’s 5.8% move outpaces FCX’s 4.4%, reflecting its higher leverage to copper prices and aggressive production expansion. The sector’s strength is further underscored by Rio Tinto’s $13,250/ton price target and BHP’s record 2,017kt output in 2025.

Options and ETFs for Capitalizing on Copper’s Bull Run
• 200-day average: 110.47 (far below current price)
• RSI: 76.87 (overbought territory)
• MACD: 5.36 (bullish divergence)
• Bollinger Bands: Price at 169.91 vs. upper band 159.86 (overextended)

Technical indicators suggest SCCO is in a short-term overbought phase but remains in a long-term bullish trend. Key support levels at 139.81 and 96.01 provide critical thresholds to monitor. For leveraged exposure, consider the Direxion Daily Copper Miners Index Bull 3X Shares (COPX), which offers 3x leverage to the copper sector. However, high volatility and overbought conditions warrant caution.

Top Options Picks:
• SCCO20260116C170
- Type: Call
- Strike: $170
- Expiry: 2026-01-16
- IV: 38.96% (moderate)
- Leverage: 44.10%
- Delta: 0.5066 (moderate sensitivity)
- Theta: -0.4714 (high time decay)
- Gamma: 0.0407 (strong price sensitivity)
- Turnover: 51,049
- Payoff (5% upside): $4.45 per contract
- Why it stands out: High gamma and leverage make this call ideal for a short-term rally, with liquidity to ensure smooth entry/exit.

• SCCO20260116C175
- Type: Call
- Strike: $175
- Expiry: 2026-01-16
- IV: 39.28% (moderate)
- Leverage: 87.08%
- Delta: 0.3151 (moderate sensitivity)
- Theta: -0.3629 (high time decay)
- Gamma: 0.035976 (strong price sensitivity)
- Turnover: 22,476
- Payoff (5% upside): $2.45 per contract
- Why it stands out: High leverage and gamma position this as a speculative play for aggressive bulls, though lower liquidity requires tighter stop-loss management.

Action: Aggressive bulls may consider SCCO20260116C170 into a breakout above $170.50, while hedging with a stop below $161.96.

Backtest Southern Copper Stock Performance
The backtest of SCCO's performance after a 6% intraday increase from 2022 to the present shows favorable results. The 3-Day win rate is 53.73%, the 10-Day win rate is 53.53%, and the 30-Day win rate is 58.43%, indicating a higher probability of positive returns in the short term. The maximum return during the backtest was 5.88% over 30 days, suggesting that while the strategy has a good chance of earning modest returns, the potential upside is capped.

Copper’s Red-Hot Momentum: What to Watch Now
Southern Copper’s 5.8% surge reflects a market betting on sustained strength in copper fundamentals, despite valuation warnings. The stock’s proximity to its 52-week high and overbought RSI suggest a potential pullback, but the broader copper market’s supply deficit and AI-driven demand could extend the rally. Investors should monitor the $170.50 breakout level and $161.96 support. Sector leader Freeport-McMoRan (FCX) is up 4.4%, reinforcing the sector’s momentum. For a high-conviction trade, consider the SCCO20260116C170 call if $170.50 breaks, but exit on a close below $161.96 to lock in gains.