What do we know about Freeport-McMoRan (FCX)? We know it has attracted a deep-pocketed, farsighted investor. Freeport is known as a copper producer, but it also digs up and sells gold and silver, which have been on a tear recently. Let's look at the charts now.
In this daily chart of FCX, above, we might be looking at a head and shoulders bottom formation, also called an inverse head and shoulders pattern. For better or worse, this label goes back to around the 1900 to 1910 period. Traders gave it a name so they could identify it and talk about it. Unfortunately, they did not think about what academics would say decades later. Now look at the On-Balance-Volume (OBV) line, which made a low in August and a second low in January, and now is above the October high. Now look at the volume -- it's heavier in August and September as the left shoulder is made. Volume is lighter on decline to the head in January and the volume is heavier since the head. In a head and shoulders bottom, the volume increases through the pattern and in a top formation it decreases on each rally failure.
The moving averages give a mixed picture right now with prices above the rising 50-day moving average line but testing the 200-day. The Moving Average Convergence Divergence (MACD) oscillator crossed the zero line in February for a buy signal, and is now correcting lower with prices, but still above the zero line.
In this longer-term look at FCX, above, we can see that prices are above the 40-week moving average line but the line is still pointed down. Volume has been strong since January. The OBV line is moving sideways on this timeframe. The MACD oscillator is rising nicely and could cross the zero line for an outright buy signal. If prices can break out above the neckline of this possible head and shoulders bottom then the upside price target becomes the $15 to $16 area. An impressive percentage move! This price target comes from measuring the distance from the bottom of the head to the neckline and projecting upward from the breakout at the neckline.
Maybe the breakout is driven by a weak dollar and strong prices for gold and silver? We'll see.