Freeport-McMoRan (FCX) is getting ready for another leg to the upside. Buyers on current weakness should be rewarded in the fourth quarter. Commodity and energy plays were crushed in 2015, but 2016 has been their year, as supply and demand came closer in balance and the U.S. dollar stayed mostly in a trading range. Let's check the current state of our favorite indicators.
In this daily chart of FCX, above, we can see that prices for FCX are trading between the flat 50-day simple moving average line and the slightly rising 200-day average line. The On-Balance-Volume (OBV) line moved up strongly from January until late July. This rising OBV line tells us that buyers have been aggressive and have accumulated shares in FCX on dips, but more significantly on strength or on days when FCX has closed higher on the day.
Buying shares when a stock closes higher means we really want it. The Moving Average Convergence Divergence (MACD) oscillator is below the zero line, but it is close to a cover shorts buy signal as the two moving averages in the MACD are poised to cross. When the $10 to $14 trading range since May breaks out on the upside, our next upside price target would become $18 (the $4 height of the trading range added to the breakout point).
In this three-year weekly chart of FCX, above, we can see the so-called bigger picture. FCX is trading above the sideways-to-slightly-rising 40-week moving average line. The OBV line on a weekly timeframe has been steady for months. The MACD oscillator is above the zero line, which is bullish and while its last signal was a liquidate longs sell, the two lines of the indicator look to be poised to generate a new buy signal.
We talked about an $18 price target for FCX in the paragraph above, but this longer-term chart shows that the next key resistance area is around $20. Sounds promising.