Freeport McMoRan, $FCX, started a move higher in November. It was slow at first and then accelerated through December to a top in January. It pulled back from there, retracing 50% of the move and then bounced. Since February it has made a series of lower highs against falling trend resistance, and fallen back to support at the 38.2% retracement of the leg up. Friday ended with a strong bearish candle at that level.
The RSI is also falling back to the lower bound of the bullish range with the MACD crossed down and now negative. The Bollinger Bands® have tightened and are shifting lower to allow a move down. There is support lower at 17.50 and 17.10 then 16.35 and 15.25 before 14.75 and 14.35 then 13.85 and the bottom at 13.25. Resistance higher comes at 18 and 19 then 19.25 and 19.70 then 20.25. Short interest is low at 2.5%. The company is expected to report earnings next April 23rd.
Options chains show big open interest at the 17 and 15 strikes on the put side this week. On the call side it is comparable and big from 18 to 20. The April chain shows the biggest open interest at the 18 strike on the put side and then it tails to 15. On the call side it is biggest at 20 and 21 with lower amounts at 19 and 18.The April 27 chain, the first after the earnings report, shows the biggest open interest at the 18 strike on the call side. The at-the-money straddle suggests an implied $2.00 move or 11.4% between now and expiry. Finally the May options have biggest open interest at the 13 put strike and it is comparable at the 20 and 21 call strikes.
Trade Idea 1: Sell the stock short on a move under 17.50 with a stop at 18.
Trade Idea 2: Sell the stock short on a move under 17.50 and buy the April 6 Expiry 18 Calls (37 cents) as protection.
Trade Idea 3: Buy the April 13 Expiry 17.50/16 Put Spreads (50 cents) on a move under 17.50.
Trade Idea 4: Buy the April 27 Expiry 17.5/15.5/14.5 broken wing Put Butterfly (57 cents) on a move under 17.50.
After reviewing over 1,000 charts, I have found some good setups for the week. These were selected and should be viewed in the context of the broad Market Macro picture reviewed Friday which with another Fed rate hike behind it and now the prospect of trade wars, saw the equity markets finish the week breaking down and looking weak.
Elsewhere look for Gold to continue in its uptrend while Crude Oil also moves higher. The US Dollar Index seems content to move sideways while US Treasuries are biased to continue to the upside. The Shanghai Composite and Emerging Markets are biased to the downside within broad consolidation.
Volatility looks to remain elevated keeping the bias lower for the equity index ETF’s SPY, IWM and QQQ. Their charts show short term weakness continuing and for the first time in years the prospect of intermediate term weakness in the SPY and IWM. The QQQ remains the best chart on the longer timeframe. Use this information as you prepare for the coming week and trad’em well.
The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.