When an asset is out of favor, it doesn't automatically make it a buy.
But when prices fall to historically low levels, it does mean that it is time to start paying attention.
On the other hand, copper and wheat have been commodity pariahs. As the following chart shows, wheat and copper prices have been flat or falling this year, but gold and silver, and most other commodities, have seen rising prices.
For the smart money and contrarians this means that copper and wheat are back on the radar.
When an investment or market gets oversold or falls out of favor, its prices normally return to average over time. This is known as mean reversion.
In mean reversion, random events can cause an asset's price or valuation to rise or fall sharply. But they always revert back to the average or mean over time.
It is similar to how a rubber band that is stretched too far always snaps back to its normal size. And copper and wheat are setting up nicely for the same thing to happen.
Because copper is an industrial metal that is used to manufacture things that modern civilization needs to operate every day, it is very sensitive to what is happening in the global economy.
So, if there is less demand for appliances, construction and phones, copper prices normally fall. And recently, there has been less demand for things made using copper, meaning that there is less demand for copper itself.
This has resulted in falling copper prices.
But copper prices may be setting up for a mean reversion trade. They may have fallen too far and stayed low for too long.
Patient investors could see a nice payoff.
The chart below shows copper prices and their 60-month moving average or their average price for the previous five years. As shown, when copper prices fall below or trade higher than their 60-month moving average, they tend to return to the average or mean.
Copper has traded well below average three times during the past 25 years.
In December 1998, copper prices were 38% below their 60-month moving average; in December 2008, during the global financial crisis, prices were about 50% below the 60-month moving average; and this January copper prices dropped to 40% below their 60-month moving average. And prices are still nearly 30% lower than the long-term average price.
Those who had bought copper in December 1998 and December 2008 and then waited patiently for prices to revert back to average would have made money. For instance, in 2008 the trade would have earned an investor a 110% return.
Copper prices have also been trading in a narrow range for the past eight months. This could indicate that supply and demand have started to balance out.
There are enough interested buyers to match all the sellers, which could mean that some investors may already be buying copper in anticipation of a mean reversion rally.
Copper supply is set to decrease as a result of several copper mining companies cutting back on their copper production.
The International Copper Study Group forecast that there won't be enough supply this year to match the expected demand.
And this will help copper prices. So this may be an excellent opportunity to buy copper.
Just remember to set up a trailing stop to protect against massive losses if copper prices unexpectedly fall.
Wheat is another commodity that people use every day. It is in everything from breakfast cereals to Belgian ales to soy sauce.
And wheat is also an extremely out-of-favor commodity. This is shown by its historic discount to its 60-month moving average.
The price of hard red wheat is 37% below its 60-month moving average. This is the most oversold that wheat has been for the past 25 years.
Besides just reverting to the mean, though, it is hard to find a reason for wheat prices to rally. Like almost every other type of grain, and copper, wheat prices soared in the mid-2000s.
At that time, Brazil, Russia, India, China and other emerging economies were booming. As these countries huge populations grew wealthier, there was more demand for food such as corn, soybeans and wheat.
Because most of these countries couldn't produce enough of these commodities themselves, demand climbed and prices along with it.
But wheat can be grown almost anywhere, and it is very resilient. So, these same countries started to invest in growing more of their own wheat.
Then Brazil and Russia, among other countries, started to produce way more wheat than they needed to. As a result, they became increasingly important wheat exporters.
In fact, for five decades, the U.S. was the world's top wheat exporter and was called the "world's breadbasket." But it now trails Russia, the European Union and Canada in total wheat exports.
A strong dollar versus other currencies has also hurt wheat prices. Major agricultural producers Argentina, Brazil and Russia have all seen their currencies fall against the dollar.
But weaker currencies make the corn, soybeans and wheat that they produce more attractive to foreign buyers. So, local farmers produce more wheat knowing there will be a market for it.
The result has been lots of cheap wheat available, and this has kept wheat prices down.
It has also resulted in global wheat stockpiles reaching record high levels because there is simply too much wheat in the world.
Because of this consulting firm AgResource predicted that the agricultural bear market will last another three to five years.
But mean reversion works best when bearish viewpoints prevail. When wheat investors get bearish and sell, the market eventually runs out of sellers.
With less selling, it is easier for prices to stabilize and eventually revert higher.
And there may be a catalyst for wheat prices to head higher. American wheat farmers have removed 5 million acres out of wheat production, from a total of about 60 million acres.
Farmers can produce more corn and soybeans per acre than wheat. Combine that with low wheat prices, and it makes good business sense to produce less wheat in the U.S.
If the same trend develops in other major wheat-producing countries, the wheat supply could suddenly drop.
Copper and wheat as commodities have been unpopular for a number of years. And their prices have hit fresh lows because of recent selling.
But when assets are being ignored and are out of favor, contrarians start taking notice. And copper and wheat are likely starting to show up on some of their radars.
To invest in copper, try a copper mining exchange-traded fund. The Global X Copper Miners ETF (COPX) - Get Report tracks the Solactive Global Copper Miners Total Return Index, which contains most of the world's top copper mining companies.
Those who are interested in wheat, should check out the Teucrium Wheat Fund (WEAT) - Get Report , which owns wheat futures contracts, providing exposure to wheat prices. This makes it more complex than a normal ETF, so investors should make sure that they understand what they are buying before jumping in.
Kim Iskyan is the founder of Truewealth Publishing, an independent investment research company based in Singapore. Click here to sign up to receive the Truewealth Asian Investment Daily in your inbox every day, for free.
This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.