FCX: The Bearish Wolfe Wave

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

In Wednesday's comment section, Priapusmon said:

"It is trading along the Wolfe wave that you have mentioned earlier."

I just now saw this comment, and it's an excellent observation. You're really paying attention, Priapusmon!

This is the chart from April 7, when we considered the threat to The Bulls of a Bearish Wolfe Wave possibility. The key to a Wolfe Wave is the Wave 5 "Fakeout/Breakout" that puts the proverbial everyone "wrong-footed." The Bulls buy the upside technical breakout, and The Bears "buy to cover" their short positons on the upside technical breakout, as well. "Everyone" is buying at the wrong time because after they do, the stock breaks below the bottom of the pattern and makes a strong move in the opposite direction, to the Wave 6 target line! UGH.



I abandoned the idea of the Bearish Wolfe Wave possibility when FCX made a second move the upside on April 8 for a "higher high," after it had appeared that the Wave 5"Fakeout/Breakout" high already was in. The April 8 candlestick was another "Gap and Crap" and it closed back inside the pattern, but that meant that this particular Wolfe Wave had to be a DOUBLE fakeout at Wave 5, and that didn't seem likely. I don't recall ever seeing that before. Learn sumpthin' new every day, huh?!

Rather, I focused on the bottom of the pattern, Trendline #2-#4, which was a validated trendline (see the green "thumbs up") and I focused on the H&S Top in the 10-Minute chart, the neckline of which got broken at 56.64 on April 11. I threw in my 500 core shares right there, at 56.64. Trendline #2-#4 also got broken on April 11, at 56.33. When a validated trendline gets broken (to the upside or downside), that usually has "some" significance, and we can see that it did.

Lo and behold, when I saw Prispusmon's comment, I checked the Wave 6 target line and saw that FCX came within three pennies of tagging it in the April 13 session! Given the facts that we sure did get the "strong move" in the opposite direction of the Wave 5 "Fakeout/Breakout," and that the Wave 6 target line got tagged within three pennies, it turns out that this was a Bearish Wolfe Wave that had a DOUBLE Wave 5 "Fakeout/Breakout," so that's a new one on me, and it's one for the textbooks! LOL.

Independent of the Bearish Wolfe Wave, though, the neckline break of the H&S Top (10-Minute Chart) at 56.64 and the breakdown of validated trendline #2-#4 at 56.33, both on April 11, gave us indications that things didn't look so hot for The Bulls.

Regarding the Wave 6 target line, just as with any other pattern, when a target gets MADE, that doesn't tell us anything about the future direction of a stock (or index). It simply tells us, "We got the anticipated move out of that particular pattern...we're done!"

For anyone short FCX, the nearly exact tag of the Wave 6 target line suggests that it might be a good idea to "Take profits, or at least 'some' profits when targets get MADE."

Thank you for your keen observation, Prispusmon. I would have missed that Wolfe Wave 6 move entirely if you hadn't mentioned it and although these Wolfe Wave patterns are rather arcane, they really do intrigue me.

EDIT: The Wave 6 target line was at 51.93 on April 13, and the low of the session was 51.96. I typed the numbers in the opposite order on the chart. The slope of that trendline is -0.31, so it came in yesterday, April 14, at 51.62, and it comes in today, April 15, at 51.31, if anyone wants to monitor it.