At yesterday's opening gong, FCX gapped down nearly two dollars, to 44.08, on some "bad news," to which I pay no attention. I'm only interested in the market's RESPONSE to news. As we've witnessed so often in the past, FCX has opened on a "Gap And Crap" into resistance, in which the stock gaps higher then fizzles and retraces much, or all, of the opening gap.
Yesterday morning, FCX was doing the reverse of that. It was gapping down into support from the EMA's (exponential moving averages) basis the 5-Minute and 10-Minute charts, which were properly threaded and moving higher. FCX was marked for a "Gap and Reverse higher," to fill at least part, if not all, of the opening gap.
The lowest of the EMA's that I look at, the 34, was at about 43.38-43.40 basis the intraday charts (5 & 10 Minute), so I placed a market order when FCX got there and got filled at an average cost of 43.38.
FCX went a little lower than the EMA's, but they ultimately provided the "sling shot" effect that I was expecting after FCX pulled back...back...back through the rising EMA's. I sold into the sharp gap-filling rally, at 44.48, for a gain of over a dollar in about six minutes' time. That was the easy part of my trading day. LOL.
FCX filled the opening gap entirely and took out the prior session's high. I bought my shares back at 44.12, at the 13 EMA. After a sharp rally like we had after the open, we like to see a stock settle in and do some basing, preferably with it forming a discernible pattern.
In this case, we got a DOUBLE Nested Ascending Triangle (pattern in white). There was a Symmetrical Triangle (pattern in orange) and a Channel (pattern in yellow) "nested" within the Ascending Triangle, both of which broke out to the upside, then the Ascending Triangle broke out it's Triple Top, the highs of which were an identical 44.45...44.45...44.45. The breakout put an upside target of 45.42 IN PLAY.
Math for the Ascending Triangle:
44.45 - High of the pattern
43.48 - Low of the pattern
44.45 - 43.48 = 0.97 points of upside on a breakout
44.45 + 0.97 = Target: 45.42 IN PLAY
I raised my mental stop to a takeout of 44.02 (horizontal red line), which was the "last low" prior to the breakout.
Unfortunately, "Ye Olde Knuckle-Biter" showed up (white circle), meaning that the stock went back below the 44.45 breakout, calling the validity of the breakout into question and it put the 45.42 upside target ON HOLD unless/until the stock breaks out again, above 44.45. As we know, those "Knuckle-Biters" are traders' decisions, based on how well we like the trade vis-a-vis the chart and money management considerations.
I was willing to sit through the first "Knuckle-biter," which found a low at 44.3266, but I wasn't willing to sit through a second "Knuckle-biter" if it took out that low. We saw what happened in late July in the FCX daily chart with the two "Knuckle-biters," after the 2011 Falling Wedge breakout, followed by the Bearish Wolfe Wave/Tidal Wave breakdown. UGH. No, thank you.
Well-ll, we got the second "Knuckle-biter" that took out the 44.3266 low so, as much as I am extremely fond of Double Nested Ascending Triangle breakouts, I threw that trade in and called it a day.
FCX did go lower than 44.32, where I sold, but the 44.02 stop never was taken out, the stock traded in a sideways consolidation for a bit, then the 45.42 target got MADE. Of course! If I held on the "Knuckle Biter," the danged stock woulda crashed on me. LOL.
Seriously, though, I don't regret my decision. There have been other times that I've been rewarded for throwing in a "Knuckle Biter," so that's the breaks. I made an extra $1,000 on that second trade so I can't complain.
After the 45.42 target got MADE, FCX Double Topped at 45.56 (uncanny how often that happens so close to a target), then took out the 45.00 pivot of the "M-Top" (synonymous with Double Top), which put a target of 44.44 IN PLAY.
45.56 - Identical highs of the Double Top
45.00 - The pivot
45.56 - 45.00 = 0.56 points of downside on a break of 45.00
45.00 - 0.56 = Target: 44.44 IN PLAY
After the Double Top breakdown, FCX had two failed retests (the first two red arrows), which were good shorting opportunities, then it got smacked on any attempt to sustain a rally through the inverted EMAs, which in juxtapostion to the morning selloff when they were properly threaded and pointing higher, now were providing resistance and pointing down.
Basis the daily chart, the 45.56 Double Top got put in just a bit below the 45.88 resistance at the bottom of the 2011 Falling Wedge.
Gain on the session: $6,450
Gain on the past four sessions: $22,100
I mention the latter to point out that, on the 5,000 shares that I've been playing in FCX during the past four sessions, all on the long side, that's about 4 points of upside while FCX has been down over 3 points during that same period of time and I certainly haven't played all of the trades that have been available, like yesterday's rally to the Ascending Triangle target, at 45.42, nor have I played any of the short trades that have been available, like yesterday's Double Top.
It's perfectly fine to watch and listen to the news, of course, and to what analysts have to say about stocks and the market, as long as we aren't immobilized like deer caught in the headlights, wondering what action we ought to be taking, if any, which seems to be what happens to many market participants.
Regardless of whether we're traders or investors, these same basic charting principles apply to intraday, daily and weekly charts and certainly don't require all of the work that I put into them, explaining in detail what's going on in them. If I were just doing this for myself, I'd just draw a few lines and save myself a lot of hours of work, typing all of this stuff out. LOL.
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