Blackmont Capital analyst George Topping has identified one potential bullish signal for copper — a decline in non-commercial (or investment) short positions.

As of March 3, there was a net short position of copper contracts on the NYMEX of 24,900. That is down nearly 10% from the end of February, when there was a net short position of 27,300 contracts, or about 680 million pounds of copper. Copper prices also rallied last week as inventories were drawn down.

Mr. Topping wrote in a note to clients:

We expect the NYMEX short positions to continue to fall as holders become less sure of their positions. A temporary copper price rally can result if speculators rush en masse to cover their shorts.

He recommended low-risk exposure to copper through Capstone Mining Corp. (CSFFF.PK), HudBay Minerals Inc. (HBMFF.PK), and Freeport-McMoran Copper & Gold Inc. (FCX).