SCCO: Channel Breakout

This news was out on July 5, and this is how the chart of SCCO looked at the close on July 6, the day of the meeting with U.S. officials.

"Peru’s Humala Visits U.S. 5-Jul-11 01:50 pm

Peru’s Humala Visits U.S. To Meet With Hillary Clinton; Possibly With Obama

Peruvian President-elect Ollanta Humala is one his way to the United States for a number of high-profile meetings Wednesday in Washington D.C.

In his first trip to the U.S. since winning Peru’s elections last month, Humala will meet with OAS Secretary General José Miguel Insulza tomorrow morning and later with U.S. Secretary of State Hillary Rodham Clinton. Mercopress also reported that Humala will meet with U.S. President Barack Obama tomorrow afternoon at the White House.

Peruvian media outlets and other news sources are reporting that Humala will not meet with Obama during his visit to the U.S.

During his meeting with Clinton, Humala is expected discuss bilateral ties and joint efforts between the U.S. and Peru to combat drug trafficking. Peru may soon take over the title of world’s top coca producer from Colombia, according to a report released by the United Nations (UN).

Humala recently completed his first round of foreign visits as Peru’s president-elect, making trips to Argentina, Bolivia, Brazil, Colombia, Chile, Ecuador, Paraguay and Uruguay. Today’s trip will be Humala’s first visit to the U.S."



At the close on July 6, the day of the Talking Heads Of State meeting, the 21/34 RSI was at Bullish Synchronicity, meaning that they had pulled back to a compression with the 21 RSI still bullishly positioned above the 34 RSI. That set up a Buy Signal from this particular indicator if SCCO could print 32.75 on Thursday, a penny above Wednesday's high, and then close higher. It did.



We never want to be unkind and say that a stock has been acting like a dawg. While we love dawgs, we want them to come with four legs, not a four letter ticker symbol. I'm happy to report that I didn't hear SCCO barking at all on Friday, which has been its wont since the H&S Top breakdown in February, 2011 ;)

While sector-related issues were down on the session, SCCO finally broke out of its channel and was up nearly two dollars on the day, capitalizing on the 21/34 RSI Buy Signal issued at 32.75, on Thursday. SCCO started the session down a little, printed a low of 32.61, then went UNCH, then rocketed higher on The Channel breakout.

The stock's REACTION to the July 5 news that there would be a Yap-Yap between The U.S. and the Peruvian muckety-mucks was a yawner. But, the stock's REACTION to the actual meeting, and to other news in the "I love copper...I hate copper" debate was the Channel breakout.

This Channel breakout isn't nearly as bullish as the "flatish" Channel that broke out on September 13, 2010, above which there was very little overhead resistance. Due to the steep declining nature of the recent channel, everything in the channel above here represents nearby resistance, but it's a breakout, nonetheless, on a decent white candle.

Many players who got long Friday's technical breakout (or Thursday's RSI Buy Signal, or Buy Signals from other indicatiors) will use a print below Wednesday's 31.82 as their stop loss. Others will use a CLOSE below that. Others will use a CLOSE back inside The Channel.

If there's an upside takeout of the May 27 "Breakout/Fakeout" high of 37.21, that could bring in some additional buying from The Bulls, buying the "higher high" and also from The Bears who "position played" the H&S Top breakdown, and who have ratcheted down their stops along the way down. That means that each time that SCCO broke down to a new low, those Bears "ratcheted down" their stop to "the last high that preceded the breakdown," each time the stock broke to a new low. That's an excellent way to manage a trade, guaranteeing a profit on the short trade, excluding a horrible gap up, of course, which always is a risk in ANY position, long or short.

The last high before the recent breakdown to fill the August, 2010 gap was 37.21, so The Bulls want to take that out to pressure any existing shorts, and any new shorts in the stock to "Buy To Cover" their postions. The more savvy among the "positioned Bears" already have covered their shorts on Friday's technical breakout near 33.00 or as the stock moved higher during the session, eroding their profit, which would account, in part, for Friday's big white candle.

"Buying Begets Buying." The Bulls bought the breakout. The Bears were pressured to "Buy To Cover" the breakout. That's known as "technical buying." Neither Bull nor Bear was thinking much about any meeting between The Mucketty Mucks, the price of copper, or any analyst's opinion about the price of copper. Both groups were motivated to buy, technically.

I put some additional notes regarding the past year of trading in SCCO on this last chart, for easier reading.