Shares of Freeport-McMoRan Inc (NYSE:FCX) has displayed promising price action this summer and currently sits in the green for the year to the tune of about 11.7%. While the broader U.S. stock market seems snoozy at best in this late August period, if we put our ears to the ground we can hear some bullish trampling in materials names such as FCX stock.
Regular readers of this here column are well aware of my primary intent to gain perspective on any stock, index or other asset class in question before identifying a valid trade setup. The reality is that without perspective as to any asset’s trends in multiple time frames, we are merely tapping in the dark and at a significant psychological disadvantage when it comes to managing a trade once open.
To wit, the broader materials sector to which Freeport-McMoRan belongs currently remains both long- and medium-term bullish yet near-term bearish according to my proprietary trend-measuring scanners.
FCX stock itself is long-term bearish, medium-term bullish and near-term neutral (about to turn bullish). How do we put all of this together into one sexy trade? Let’s look at the charts …
FCX Stock Charts
Moving averages legend: red – 200 week, blue – 100 week, yellow – 50 week
On the multiyear weekly chart, note that FCX still trades in a well-defined multiyear down-trend, the upper end of which currently also lines up with the red 200-week moving average.
In early 2016, FCX stock bounced off the lower end of this channel and ever since has slowly pushed back toward the upper end, which now also becomes the focus of my next upside target.
Moving averages legend: red – 200 day, blue – 100 day, yellow – 50 day
On the daily chart, note that FCX stock had a strong on July 25 rally following its latest earnings report. This rally also came on an up-gap and a significant spike in volume (blue arrows). Ever since, the stock has been consolidating this move, which now however looks increasingly likely to resolve to the upside for a next leg higher. This would be a classic post-earnings and post-up-gap continuation trade, which highlights the significance of such gaps in the market.
Two ways to trade it:
For stock traders, FCX could be bought on a push and hold above $15 for a first upside target around $17 and ultimately through a multimonth/quarter lens toward $20.
Options traders may find a Nov. 15-Nov. 17 bull call spread a worthwhile consideration if FCX stock gets moving back above the $15 mark.
Check out Anthony Mirhaydari’s Daily Market Outlook for Aug. 22.
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