BIDU, FCX And FAZ

(Click on charts to enlarge, then click on them again for further enlargement. Use back arrow at the top of your browser to return to the narrative).

BIDU sold off a dollar in the early going yesterday morning, then turned Tuesday's upside technical breakout of the rising channel into a rally to new highs. Did I mention "excellent relative strength" yesterday? LOL. No doubt, the rally was fueled in part by The Bears continuing to short this stock, "hoping" that it would play catch-up with the Nasdaq on the downside. UGH.

While breakouts and breakdowns do sometimes end up being fakeouts, I find that it's best not to argue with Ms. Market and to try to follow instructions. Unless we see evidence of a fakeout: "Don't short upside technical breakouts, and don't buy technical breakdowns."



Pre-market yesterday morning, Freeport McMoran Copper & Gold (FCX) was called to gap higher, at 53.00. I hadn't looked at it for a few days, so I quickly opened the chart to take a look at it, and this chart is what I saw.

FCX had broken out of this big Falling Wedge, had successfully retested the trendline in Tuesday's trading on a Bullish Doji Star Hammer, and my 21/34 Fibonacci Relative Strength Indicator (the Green "21" under yesterday's candle) was about to issue a Buy Signal on any trade above 52.68, which was Tuesday's high.

And, it was called to open at 53.00??? Oh-h-h, buddy! I was licking my chops like my little doggy boy pictured in my avatar ;)

My only decision when I saw that opening indication was "where" I would buy it, not "if" I would buy it. Since the indcated price was below last Friday's breakout high of 53.29, I decided not to pay the opening price of 53.00, and to take the chance that there would be a quick selloff toward the gap that would be left
on the chart from Tuesday's high of 52.68. That strategy worked out fine. I bought FCX in both of my accounts in the 52.70's, slightly above the gap high of 52.65.



As we've seen so many times in the past, Falling Wedges often "morph," or change, into a Bullish Inverse Head & Shoulders patterns. It's difficult to see it on the daily chart, which is why it's very helpful to look at intraday charts, like this hourly chart, in which the pattern is much clearer.



After a couple of pullbacks early in the session, which ended up filling the opening gap in the daily chart entirely, FCX put in this strong white candlestick on the session.



I took a quick gain of $500 in one account, and raised my mental "stop loss" to a break even in my other account to lock in a winner.



I took a larger gain in the other account later yesterday afternoon. Since my FAZ sale also is listed here...



...I purchased it on Tuesday, in anticipation of an upside breakout of an Ascending Triangle, seen in the chart below.



FAZ gapped higher at the open and immediately made a run for my initial target, which was the recent highs represented by the horizontal red line. I "sold into strength" with the idea of repurchasing it if it pulled back and consolidated the early gains. My next upside target was the gap above.



No pullback in the early going. FAZ ran directly to the gap (the horizontal yellow line), which was my second upside target. The gap got filled within just a few pennies, then FAZ sold off for the remainder of the session. Notice that after the gap fill, FAZ tried to find support at the horizontal red line, the previous highs (see red arrow). That failed, and FAZ gave up all of the session gains, but did find support near the top of the Ascending Triangle (white arrow). That's "constructively bullish," but I wanted to hang onto my gain and wasn't interested in holding FAZ over night.

Gain on the session: $3,550.