Investors who are bullish on China received some good news on Tuesday. Three separate reports indicated that China's economy was stronger than expected, and could remain that way for the near-term future.
The reports fall into the purchasing managers' index (PMI) category. A purchasing manager is responsible for maintaining a company's supplies, and must keep close tabs on the company's needs. Therefore, a survey of purchasing managers provides insight on the near-term outlook of an economy.
PMI survey readings above 50 indicate growth, while results below 50 signal contraction. China's manufacturing PMI, services PMI, and the private Caixin China manufacturing PMI all came in above 50, as well as above analysts' expectations.
Compare China's figures to Europe's manufacturing PMI (48.5) and the U.S. manufacturing PMI (47.3). The local Chicago PMI came in at an abysmal 43.6. PMI figures for service-oriented businesses in the U.S. and Europe are due later this week.
These figures indicate that China's reopening is in full swing. How should investors play it?
China consumes more copper than any country on earth, and demand for the red metal rises as its economy improves. While there are multiple ways to play an increase in demand for copper, mining giant Freeport McMoRan (FCX) presents an interesting opportunity right now.
The geographically diverse, Phoenix-based global mining outfit exploded higher on Wednesday on heavy volume (arrow). It was the highest volume for Freeport in over a month, a sign of enthusiasm on the part of investors, and the stock closed at its highest level in nearly a month.
Chart Source: TradeStation
The stock managed to climb back above its 50-day moving average (blue) for the first time in a week, and remains well above its 200-day moving average (red). Freeport McMoRan has gained 26% since we last recommended it in November, thanks to a cup-and-handle breakout (curved black lines, point A). The stock is rapidly closing in on its 52-week high of $46.64, set on January 25 of this year.
One reason why I like Freeport McMoRan here is because of copper's chart. Copper is roaring higher within a bull channel (parallel lines), and the next major resistance for the metal is the June 2022 high, near 4.55 (red dotted line).
Chart Source: TradeStation
China, copper, and Freeport McMoRan are all closely related.
By owning Freeport McMoRan, I'm playing China's reopening via a company based outside of China. I'm adding to my long position in this stock.
