We looked at the charts of Freeport-McMoRan (FCX) earlier this month and concluded, "In this Point and Figure chart of FCX, above, we can see a price target of $21.50 is shown. A trade at $17.50 will be a fresh breakout. Continue to trade FCX from the long side looking for a recent flag formation to break out on the upside and propel prices to new 2017 highs."
With the active December copper future (chart below) trading with a new handle of "$3" today a fresh look at FCX wouldn't hurt, as they say. Jim Cramer highlights Freeport in his article about what's behind Tuesday's rally.
In this chart of the nearby December 2017 copper future, above, we can see that prices are in a second up-leg this year following a breakout from a 2015-2016 base pattern. Prices are above the rising 50-day moving average line. Prices are extended on the upside but there are no signs of distribution yet. Remember that the rally in copper prices is no longer a page 16 story.
In this daily bar chart of FCX, above, we can see how prices made a saucer-like bottom from March through July. A strong upside move and breakout can be seen in late July. Notice the strong volume? Prices are above the rising 200-day moving average line as well as the rising 50-day line. The 50-day line could cross above the 200-day line in the near-term. This technical signal is called a golden cross and tends to be a sign of strength and a buy signal, though the signal tends to come well off the bottom.
The daily On-Balance-Volume (OBV) line peaked in December and weakened until June, signaling liquidation and more aggressive selling. Since June the OBV line has risen modestly. A much stronger OBV line would give me more confidence that FCX can break out above $17.
In this weekly bar chart, above, we can see how FCX has made a large bottom pattern dating back to mid-2015. Prices are above the flat to rising 40-week moving average line. The weekly OBV line is overall neutral with an upward slant since February. The weekly Moving Average Convergence Divergence (MACD) oscillator has turned up above the zero line for an outright go long signal.
In this Point and Figure chart of FCX, above, we can see both the 2014-2015 downtrend and the uptrend from early 2016. The recent consolidation pattern gives us a potential upside price target of $21.50 but a trade at $17.50 is needed for the breakout.
In this weekly bar chart of the (JJC) , the iPath Bloomberg Copper Subindex Total Return ETN, above, we can see that prices are above the rising 40-week moving average line. There was a breakout last month at $32. Volume increased and the weekly OBV line broke out to a new high confirming the rally. The weekly MACD oscillator crossed to the upside for a fresh outright go long signal.
In this Point and Figure chart of the JJC, above, we can see that prices are close to breaking a six-year downtrend line (not shown). A potential longer-term upside price objective of $50 is shown.
Bottom line: We presented a lot of charts -- the stock, the futures contract and the ETN -- to round out the presentation. FCX looks like it can rally and retest the January-February highs around $17. Prices look like they can break out on the upside but we always want to have a risk point in mind. A close below $14 on FCX would turn the chart bearish and I would liquidate long positions.
