Trade of the Day: Snapback Rally Could Deliver Big Profits in FCX Stock

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Freeport-McMoRan Inc (FCX) — Shares of this natural resources company fell almost 7% Tuesday, bringing the year-to-date loss to more than 70% as a strong U.S. dollar and plunging oil prices have squeezed the company’s margins.

The bears have had a field day with FCX stock all year long, as every oversold bounce has led to more selling. While the trend is clearly down, those sharp snapback rallies have delivered upside profits. And given the juncture the stock currently finds itself at in the big picture, another tradable bounce may well be in the cards.

For a little perspective, let’s look at the long-term chart.

FCX Stock Chart
Click to Enlarge

Since topping out in 2011, the entire rally off the 2008 lows was wiped out as FCX stock arrived back at a major long-term support area. Then, with Tuesday’s drop, shares broke below their late-2008 lows.

Through a technical lens, though, this may be exactly what we need for a bounce. Bottoms tend to be events rather than processes and often take on a “V” shape. The break below the 2008 lows may have shaken out some of the last remaining bulls, and we also saw heavy put buying, an indication of negative sentiment.

Moving on to the daily chart below, Tuesday’s drop also took FCX stock below its late-August lows and registered what appears to be a higher low in the MACD momentum oscillator.

FCX Stock Chart
Click to Enlarge

Any bullish reversal must, of course, be confirmed by higher prices, but FCX stock presents an interesting opportunity for traders and active investors looking to capitalize on an oversold stock with extremely negative sentiment. Buy the next strong bullish reversal for an initial move back toward the $10 area, which is nearly 50% above the current price.

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Download Serge’s trading plan in the Essence of Swing Trading e-book here. As of this writing, he did not hold a position in any of the aforementioned securities.


Article printed from InvestorPlace Media, https://investorplace.com/2015/12/freeport-mcmoran-inc-fcx-trade-of-the-day/.

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