SPX, FCX And SLW

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

The Bears were able to take out the May 25 low of 1311.80, so that completed a Double Top, Or "M"-Top. The highs are 1346.82 and 1345.20, with 1311.80 being the intervening pivot of the "M." (the horizontal red line). That breakdown put a downside target of 1278.40 IN PLAY, but The Bears weren't able to close the session below the 1311.80 pivot, so the target is ON HOLD unless/until The Bears can take the index back below 1311.80 again and keep it below there.

After a wicked Bearish Reversal session on Wednesday (the Falling Wedge breakout got reversed on a long black candle), The Bulls did about the best they could yesterday. They showed up when the index got to within about two points of the bottom of the Wedge, rallied it back above the 1311.80 broken support of the Double Top and closed the session out at 1312.94 on a bullish-looking Doji Star Hammer. It isn't bullish without upside confirmation. The Bulls need, eventually, to take out the highs of the Double Top in order to do anything convincing.



In FCX, Trendline #2-#4 came in yesterday at 48.935. That trendline was QUINTUPLE resistance, prior to the upside breakout to the top of the Falling Wedge. On a pullback, "former resistance 'should be' support." It was.

FCX bottomed at 48.93 before noon, then rallied to 49.31. It pulled back for another retest of 48.93 support just after noontime, and put in a little fakeout low of 48.90, three pennies below support.



I put in my buy order at 48.93 on that second test of support, but didn't get filled. Because I play in size (large orders), I often get nicked on market orders, so I put in a limit order. It irritates me to get filled at price higher than the ASK when I submit my order, but a limit order in this situation was a BIG mistake. FCX pounded higher off that 48.90 low and I got no chance at a pullback to modify my order to a market order.

I need to get over being stubborn about limit orders in fast market conditions. It cost me $1,000 of profit on this trade. Curses!



When I saw that FCX broke out of this Double Bottom, above 49.31 (horizontal white line), I cancelled my 48.93 order and resubmitted at 49.33, just above the breakout, looking for a pullback. The forty cent differential times 2,500 shares was the $1,000 profit that I didn't get. Served me right. When a trade is as compelling as this one was, MARKET ORDER, Melf! .

The Double Bottom breakout put an upside target of 49.69 IN PLAY, and the subsequent Bull Flag breakout (pattern in yellow) put a target of 49.66 IN PLAY. I sold when those targets got MADE.



SLW has had four bearish pattern breakdowns (red arrows) since we had the morph to the Bearish Rising Wedge (pattern in blue), which broke down at 44.44 on April 11. We still have two downside targets IN PLAY. Whether or not those will get MADE remains to be seen, but when a chart is bearish, we want to look for opportunities to short it.

The recent pattern in SLW off the May 12 low is a Rising Channel/Bear Flag. Those don't always resolve to the downside. There's no "always" in the stock market. But, we know to expect patterns to resolve in the direction of the trend, so we can watch for that.





The Rising Channel/Bear Flag in this intraday chart is a "fractal" (repeating pattern) of the one we just looked at in the daily chart. The white arrow was a successful retest of the bottom of the pattern, so it was a trendline validation of support. When validated trendlines get taken out, that ususally has "some" significance.

The pattern broke down late Wednesday afternoon. Retests of broken support often are a great place to enter a stock short, so before the open yesterday, I entered an order to sell short SLW at 36.18, the bottom of the broken trendline, with the expectation of a gap fill in this chart (the horizontal red lines) and a retest of the bottom of the Rising Channel/Bear Flag in the daily chart.

The gap in this chart was 34.45 - 34.72. I covered my short just above the top of the gap, which worked out very well. The gap didn't get filled entirely. SLW put in a low on the session at 34.53, then rallied a dollar and closed at 35.25, back inside the Rising Channel/Bear Flag after the intraday violation of the bottom of the pattern.



Gain on the FCX and SLW trades: $4,500.