FCX: The Inverse H&S Breakout

(Click on charts to enlarge, then click on them again for further enlargement. Use back arrow to return to narrative).

I "sold into strength," at 54.90, one of my positions in FCX on the early morning rally to anticipated resistance at the top of this triangle. FCX rallied to a high of 55.18 then traded sideways-to-down for the remainder of the session. Gain: $700.



I bought those shares back at the end of the day for 54.45, and I'm still holding the shares in my other account that I bought on March 24, for 53.95. I've now got a gain of about $3,600 on the four closed trades this week in FCX.



I like the fact that FCX is consolidating here, above the neckline breakout.



As I've mentioned a number of times in the past, Bullish Falling Wedges (pattern in black) are my LEAST favorite bullish patterns because when they breakout, they have a lot of resistance from the "falling" candlesticks that preceded the breakout. I like them much better when they rally to form a neckline, then "morph," or change, into a Bullish Inverse Head & Shoulders pattern, as FCX has done (the pattern in green). That gives the chart a more solid structure from which to launch a better rally.

The upside target for the Bullish Inverse H&S breakout is derived by subracting the low of the pattern (46.20) from where the neckline was (53.38) when that low got put in, then adding that amount to where the pattern broke out to the upside, which was 53.24.

53.38 - 46.20 = 7.18 points of upside, added to the 53.24 breakout point, gives us a target of 60.42 IN PLAY, as long as FCX trades above the neckline breakout. If FCX trades below the neckline, that's one of those "knuckle-biters," like we saw in ARIA after it broke out of its Bullish Falling Wedge. ARIA had a very sloppy breakout, whipsawing above and below its Bullish Falling Wedge upper trendline, then it took off to the upside.

The ETA (estimated time of arrival) for the FCX target of 60.42 that is IN PLAY is by Easter Monday, April 25, which simply is the same number of days from the breakout (March 23) that it took for the Bullish Inverse H&S pattern to form. That's just a guideline that I like to use. If FCX hasn't traded somewhere near that target by Easter Monday, I have to question how sincere it was about the bullish breakout ;)

Targets aren't any sort of guarantee, either. They simply are "what we're aiming for" based on what the pattern measurement suggests. A lot can happen between a breakout (or a breakdown) and the anticipated target getting MADE.