FCX: Bearish Tidal Wave

As we know, when targets get MADE, that doesn't mean that a stock can't go higher or lower than the target. It just means that the target for that particular pattern has been achieved. In this particular case, after the Bearish Wolfe Wave target got MADE...



...it turned into something more akin to a Bearish Tidal Wave, destroying everything in its path. From the Bearish Wolfe Wave "Fakeout/Breakout," nine months worth of support was taken out in about two weeks' time. UGH. That's the purpose of a Wolfe Wave, though, to get the proverbial "everyone" wrong-footed, then ripping in the opposite direction of the fakeout.

When stocks get beat up this badly, they usually need time to regroup and to build a base like FCX did with the Bullish Inverse H&S in March, the Bullish Ascending Triangle in April, and the Triple Breakout Through Triple Validated Resistance in late June. After a bludgeoning like this, a "V-shaped" bottom certainly is possible, where the stock goes straight down and then straight up for awhile, but those bottoms are uncommon.

While we always want to be careful about trying to "catch a falling knife," where a stock is selling off below all nearby support, which FCX was doing on Friday, it certainly is reasonable to look for areas of possible support, for at least an oversold bounce, which is what I did on the early selloff.

As we can see in this chart, the bottom of the 2011 Falling Wedge came in on Friday at 45.893, so I made my inital purchase at that level, looking for it to provide support. FCX did manage to stick the close at 45.99 at the final gong, but it was a wild ride between hither and yon getting there, let me tell you! LOL.



The next support that I was looking at was the bottom of the Kumo (Cloud), basis the weekly chart, at 44.85.



The bottom of the 2011 Falling Wedge, at 45.893 didn't hold. FCX sold off to an early session low of 45.43 (yellow up arrow) so my trading plan was busted. I sold my shares at 46.15 into the first bounce into the inverted EMAs (yellow down arrow) for a decent gain and planned to buy my shares back if FCX tested the bottom of the weekly Kumo (Cloud), at 44.85.

Be careful what you wish for! I got back in at 44.82, but nearly was stopped out at 43.82 when FCX sank to 44.03. UGH. I sold into the next rally, at 45.37, looking for the stock to establish a neckline of an Inverse H&S bottom, or a flat top for an Ascending Triangle, with a plan to buy back the shares again near the 44.85 bottom of weekly Kumo (Cloud), if I could get them.

I got back in at 44.88. That was the money trade. The Right Shoulder of the Bullish Inverse H&S pattern was a "nested" Bull Flag (the pattern in orange), lending strength to the pattern. The H&S pattern is very unorthodox. The volume isn't right. The Right Shoulder is wider than the Left Shoulder, which it "shouldn't" be. As we've seen many times, though, those often work out fine, as this one did. If it had failed after the breakout, I would have stopped the trade out below the low of the Right Shoulder (which also was the low of the Bull Flag, in orange).

The breakout put a target of just under 47.00 IN PLAY. It was a breakout against the trend, and those are less likely to get MADE, so I sold very early, at 46.20, and played it a couple of more times afterwards, but the Bullish Inverse H&S target just below 47.00 did end up getting MADE at the afternoon high of 47.1556.



Gain on the session: $12,400