FCX: H&S Top And Broken Channel

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

Coming off the morning highs of 57.60 and 57.60, FCX formed these three bullish patterns, putting upside targets of 57.31, 57.37 and 57.40 all IN PLAY. When we get multiple targets in the same price area, that increases the chances that the targets will get MADE, or least somewhere in that target range. In this particular case, all the targets got MADE so I sold the shares that I purchased at 56.04 during their formation, for a price of 57.39, at the last of the three targets.

What happened after that gives further testimony to why it's a good idea to "Take profits, or at least 'some' profits when targets get MADE." FCX rallied only to 57.47 right after I sold, then went into a serious tank to the downside.



Gain on the trade: $875



When FCX tested 56.64 neckline support of a possible H&S Top (see next chart) for the SECOND time in the session, I didn't wait for it to breakdown, the chart looked so weak. I threw in my core 500 shares that I last had repurchased of April 8, for 47.72 and took a loss of $550 on those shares. I had some nice gains jockeying for postion with those shares, but it looked like it was time to "Fold 'Em."

Gain on the session: $325
Gain on the 17 FCX trades since March 23: $13,350



The 56.59 - 56.64 neckline of this H&S Top broke down immediately after I sold the 500 shares for 56.64, putting a downside target of 54.50 IN PLAY.

Math:

58.75 - High of the head
56.61 - That's where the neckline was at the 58.75 high

58.75 - 56.61 = 2.14 points of downside from the point of the breakdown (56.64)

56.64 - 2.14 points = Target: 54.50 IN PLAY

Targets that are against the trend (trend is bullish) are less likely to get MADE than targets that are with the trend, but we can see from the afternoon smackdown that occurred in FCX that a big percentage of the target already has gotten MADE at the afternoon low of 55.06.

When stocks break out or break down, we don't always get confirmation, which occurs when the stock retests the breakout or breakdown. With this H&S Top breakdown, however, we got DOUBLE confirmation.

After breaking the neckline, FCX fell to 56.27, then rallied to 56.58 (first red arrow), failed right at the 56.59 neckline, then took out the 56.27 low and fell to 56.07. UGH. From the 56.07 low, FCX rallied again to exactly 56.58 resistance (second red arrow), failed for the second time, then took out the 56.07 low, which confirmed that second failure. UGH.

Ms. Market had spoken rather clearly on that takeout of that 56.07 low: "The Bears broke the 56.59-56.64 neckline, and I've shown you TWICE that The Bulls' attempts to regain that neckline have failed. The Bears successfully defended their breakdown of the H&S Top. TWICE. What else do you wanna know?"

"Okay, okay, Ms. Market. You don't have to yell at us," cried The Bulls ;)



Basis the daily chart, FCX also has broken below the validated lower trendline of the Rising Channel, and broken below it decisively. At tomorrow's open, The Bulls will have to "chase" the bottom of The Channel if they want to regain it. We know that the 56.59-56.64 neckline was TWICE valided resistance in today's session. Shall we hazard a guess about where the broken channel comes in for tomorrow's session?

Uh-huh...56.65.

Soo-o, 56.59-56.65 is DOUBLE resistance for tomorrows's session: (1) it's the broken necline of the H&S Top basis the intraday chart; (2) it's the bottom of the broken Rising Channel in the Daily Chart.