FCX: Six Scores For The Bulls

The first two patterns below were intraday patterns on Monday (see Tuesday morning's intraday chart, for review), which preceded Tuesday's Triple Breakout through Triple Validated Resistance.

The last three patterns listed below comprised the Nested Falling Wedge pattern in the daily chart. Nested patterns (my own terminology) are patterns that have one or more smaller pattern "nested" within it. As we've seen so often in the past, when they break out or break down, they can "pack some punch," as did the rally this week off Tuesday's Triple Breakout through Triple Validated Resistance. From Monday's Triple Top/Ascending Triangle low to yesterday's high, FCX has rallied 12.7% in just four days' time.

Here's the result of those breakouts that we've got, so far:

Pattern #1: Head & Shoulders Top. Target: 48.97 MADE.

Pattern #2: Triple Top/Ascending Triangle. Target: 49.60 MADE.

Pattern #3: Bull Flag/Channel. Targets: 51.07 and 53.24 both MADE.

Pattern #4: Symmetrical Triangle. Target: 52.19 MADE.

With those four pattern targets all MADE, the easy part of the rally is completed. As always, it's a good idea to "take profits, or at least 'some' profits, when targets get MADE." In this case, a total of six targets have been MADE, including the first Falling Wedge target, listed below.

Pattern #5: Falling Wedge. Target: 52.70 MADE. Targets: 56.49 (the high at Black #3) and 58.75 (the high of the pattern) still are IN PLAY.

I've never found anything in technical analysis that is reliable as far as measuring a target for Rising and Falling Wedges. I find them to be the least reliable of the patterns when they break out or break down. In the case of this particular Falling Wedge breakout, most of the candles in the chart when the pattern broke out at 49.188 were traded at prices higher than that breakout number, so all the candles that are higher, preceding the breakout, represent a fairly immediate overhang of sellers who paid a higher price and who would like to sell the stock at a break even. That same problem contributed to the selloff from the May 31 high of 52.70 to the June 16 low of 47.06, so we want to be mindful of that.

Much depends on the amount of resistance there is, prior to the breakout. In this case, we've got a fair amount. Much also depends on how good the breakout is. In this case, a Triple Breakout through Triple Validated Resistance is a strong breakout, as we've witnessed this week, so that's certainly a positive.

As far as a Falling Wedge target is concerned, the general idea is "a rally back toward the high of the pattern." We just looked at an excellent example of that in yesterday's chart of AMZN, which rallied to within pennies of the top of its Falling Wedge, but AMZN also didn't have the kind of overhead resistance that FCX has. So, you see what I mean about "it depends" on a number of factors.

We also can take the high minus the low of the Falling Wedge pattern, then add that to the 49.118 breakout point. That's a perfectly valid way to establish a target, but it might be a bit ambitious, given the amount of resistance in the stock. That's something farther down the road, if FCX continues to act bullish, so we won't get ahead of ourselves. Just be aware that between here and the top of the Falling Wedge, The Bulls have some resistance with which to contend, and there's a larger Falling Wedge seen in this Ichimoku Kinko Hyo chart, which goes back to January.



We can "See at a glance...the table of balance" that the last two rally attempts ended with FCX banging its head on the bottom of Kumo (Cloud) resistance, on May 3 and on May 31. Yesterday's close above the Kumo (Cloud) was the first close in Bullish Territory in two months' time. That doesn't guarantee anything about the future, but it's a score for The Bulls. Actually, it's six scores for The Bulls since six targets got MADE in the process. LOL.

On a pullback here, the Kumo (Cloud) "should" act as support. Specific support levels:

1. 50.38 - 50.46 - The recent highs and the gap from June 28.
2. 49.62 - 49.90 - The bottom of the Kumo (Cloud) and former Double and Triple validated resistance



Looking at the one year chart, we also can "See at a glance..." that the first half of 2011 has been a consolidation of the extraordinary gain that FCX enjoyed during the last half of 2010. Other than the Head & Shoulders Top pattern, which resolved to the upside, there was no consolidation of that 116% gain to speak of. From that perspective, this lengthy period of consolidation certainly isn't unwarranted and, structurally, it's very healthy. Stocks that go straight up, parabolically, without any consolidation, are in danger of "Ye Olde Parabolic Rally...And Parabolic Return" to the origin of the rally, or somewhere near there. Here's a rather ugly illustration of that:



YEESH.

By comparison, the last six months' consolidation in FCX doesn't seem so bad now, does it? ;)

Have a great 4th of July weekend, everyone!