Titanium Rises But For How Long?

March 24, 2010 | By | Reply More

Interest in Titanium since Boeing’s order book showed a healthy increase has caused sharp rises in the metal’s producers in recent weeks.

Yesterday Titanium Industries (TIE: NYSE) showed us the way with a 9% rise that has continued through to this morning’s trading.
With producers showing up to 30% gains since the beginning of the year and after Boeing’s union troubles we trust you will pardon us using the pun `titanium flies`.

In case you do not know, titanium has many uses in the aviation industry, both civil and military, as well as other numerous industrial and medical applications such as dental implants, golf clubs, jewelry, spectacle frames and some sunglass lenses to name a few lesser known uses. Nor should we forget that titanium oxide is an essential ingredient of white paints.

We have a couple of friends who are airline pilots that have been telling us for over a year that Boeings Dream Liner will knock spots of it’s European rival, the Airbus.

Although their explanations were too technical for us to understand, we did at least gather that the Dream Liner is considerably more fuel efficient. This recognition has now resulted in an excellent order flow with a knock on optimistic effect on titanium.

Whether there is any further substantial mileage in titanium stocks we would hesitate to advise particularly as we feel that stock markets are looking in the face of a sharp fall before long. We can see no justification for the markets to attain the peaks of 2007 and that this very substantial bounce is rapidly running out of legs.

Be that as it may, those of our readers who fancy that titanium can outperform other rarer metals used in industry and are prepared to have a bet, then we believe that buying call options is the way to go.

As a general rule of thumb we do not like to pay more than a dollar a share for each contract and prefer below 50 cents but it is important to always keep in mind time erosion.

Of course you may think, as we tend to, that buying puts in the present state of the market might make more sense, however there are many more likely candidates in the stock market for dropping like a stone than our titanium producers.

Either way when such uncertainty in the markets is around buying call or put options draws a line under your potential losses. When to close a loss making position is just about the hardest thing a trader or investor has to learn.

Judicious trading in options can take those decisions away from you so that you should never face running out of money.

Keep an eye on Titanium Industries (TIE) and RTI International Metals Corp (RTI), they are both trending up in a very healthy manner. Old market hands will always tell you that “the trend is your friend”.

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Category: Titanium

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