by Serge Berger | April 25, 2014 7:43 am
Before the start of trading in New York yesterday, copper and gold mining company Freeport-McMoRan (FCX) reported its first quarter results, which helped prop up FCX stock only a little — but it did serve a big purpose from a technical perspective.
FCX earnings came to 49 cents, beating estimates by 6 cents. Revenues of $4.99 also bested the Street, which was looking for $4.94 billion. On a year-over-year basis, EPS were down by about 28%, but sales were higher by roughly 9%.
The company’s energy business, which it acquired last year, helped earnings in the quarter. As Freeport is now part-energy company, this could at the margin also speak well for the price of FCX stock in this late cyclical bull-market environment, where energy and large-cap stocks tend to outperform.
Along with gold, many mining equities such as FCX stock have rallied year-to-date. More importantly, the iPath-Dow Jones UBS Commodity Index (DJP) is up around 10% so far in 2014, which speaks to increasing inflation expectations and should be supportive for mining stocks like Freeport-McMoRan.
Thursday’s final result was a 1.3% improvement for FCX stock, which is hardly a big win in percentage terms, but again, was useful to the charts.
First, on the multiyear weekly chart, we can say that FCX stock has resistance that is clearly defined as its support. FCX stock fell along with the price of gold in recent years after topping out in early 2011. Over the years, Freeport McMoRan has found support a couple of times in the $26-$28 area, which investors can use as a last stop-loss reference area, should FCX take a meaningful turn for the worse anytime soon.
In terms of resistance, the major reference line is the diagonal resistance from the 2011 top.
On the daily chart, FCX stock so far this year has found good support twice near $30.50, which through a technical lens matches up with the 61.8% Fibonacci retracement of the May 2013-January 2014 rally.
Freeport has been stuck in a range since early February, but with yesterday’s post-earnings rally, FCX managed to marginally break out of this rut and also overcame its 100-day moving average (blue) for the first time since last August.
From here, FCX stock stands its best chance yet this year to push toward the aforementioned multiyear diagonal resistance line (black) and over the coming months, also possibly back to the January highs near $38.
If Freeport McMoRan drops back below $33.40 in coming days or weeks, however, then this post-earnings breakout will be nullified and FCX stock would reset again for another try higher.
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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.
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