FCX: Rally To 45.88 Resistance

FCX was called higher yesterday morning from Wednesdays's close of 43.55 and opened at 44.30. On the heels of Wednesday afternoon's selloff, that was marked for a "Gap And Crap" opening, meaning that The Bulls' attempt to bully their way through that nearby price resistance wasn't likely to work and that the opening play likely would get called back for a fill of some, if not all, of the opening gap. Most of the opening gap got filled on the pullback to 43.66.

An opening gap out of a pattern has a much better chance of being a Breakaway Gap, or a "Gap and Go," rather than the "Gap and Crap" opening that we witnessed yesterday, which is known as a "common gap." The latter is tantamount to a quarterback trying to throw the "long bomb" on 3rd down and 25 into heavy traffic. Can we say I-N-T-E-R-C-E-P-T-I-O-N?

Rallies have a much better chance of being sustainable if The Bulls can establish a running game, i.e. a pattern or patterns, then then throw some long passes (breakout rally).

The Bulls settled in and formed a Bull Flag/Falling Channel (the pattern in white). The opening gap is the flag pole. The duration of the flag is a bit dragged out to be called a Bull Flag for some technicians, but I'm never one to quibble. If it walks like a duck...quacks like a duck...but, it's perfectly fine if anyone wants to insist that it's just a regular ol' channel. The only thing that matters is how it plays out.

At the white down arrow, we've got validated resistance, and we know how significant that can be if The Bulls can take out a validated trendline to the upside. That tells us that The Bears failed to do their job of smacking The Bulls down and that they've weakened a bit.

I got long at 44.05. The Bulls had established the running game (formed a pattern) and the Fibonacci 13, 21, 34 EMA's (exponential moving averages) were getting "in gear" with the 13 above the 21, and the 21 above the 34. The Bulls now were ready to throw some nice passes (break out and move higher). The Bulls broke out of the pattern at 44.20, putting an upside target of 45.18 IN PLAY.

Math for the Bull Flag:

44.64 - High of the pattern
43.66 - Low of the pattern

44.64 - 43.66 = 0.98 points of upside on a breakout above 44.40

44.20 + 0.98 = Target: 45.18 IN PLAY

After the breakout and rally to Yellow #1, the Bulls established another pattern, The Rectangle (in yellow), then broke out of that. Lovely. That breakout put a target of 45.28 IN PLAY.

Math for The Rectangle:

44.89 - the most consevative of the highs
44.50 - the most conservative of the lows

44.89 - 44.50 = 0.39 points of upside

44.89 + 0.39 = Target: 45.28 IN PLAY

What wasn't lovely was that The Bears managed to throw The Bulls for a sizeable loss, back below the pattern breakout, which put the 45.28 target ON HOLD. UGH.

The loss was more that just "Ye Olde Knuckle-biter," where we're back below a pattern breakout wondering how valid the breakout was. The Bulls got thrown for a loss well inside the pattern, and the EMAs were turning down.

I never try to predict anything. I'm just trying to follow orders as best I can and beyond the analysis, foremost in my mind when I'm in a trade, is MONEY MANAGEMENT. As the trade progresses, I'm asking myself how well I'm liking the trade and whether or not I see a possible problem.

I didn't like that pullback, well inside The Rectangle. I sold on the rally back toward the EMAs, at 44.73, and watched from the sidelines.




The Bears were able to morph The Rectangle (in yellow) into the Left Shoulder of a H&S Top, then break that pattern to the downside! Hmmm-mmm...

Morphs (pattern changes) are very common, particularly in a 1-Minute chart. Literally, one minute a pattern can look like on thing, then the next minute or three, it "morphs" into something else.

The Bears weren't making much progress with their H&S Top breakdown, and with those patterns, The Bulls always have a chance of morphing The Head and The Right Shoulder of the pattern into a Channel, then taking out the high of the Right Shoulder, then eventually, the high of The Head. Like this:



The Bulls not only morphed the H&S Top into a Channel breakout, they also threatened to put in a Double Bottom (the pattern in red). I got long again at 44.67 when I saw that possibility developing. The high of the Right Shoulder of the Bears' H&S Top is where the top red horizontal trendline begins. As we've seen in the past, when The Bulls take out the high of a Right Shoulder (that top red trendline) AND take out the high of The Head, that can spell trouble for The Bears. A Double Bottom breakout would put 45.24 IN PLAY, very near the 45.18 and 45.28 targets (the latter target would go back IN PLAY above 44.89).

Math for the Double Bottom:

44.82 - the more conservative of the highs
44.40 - the more conservative of the lows

44.82 - 44.40 = 0.42 points of upside on a breakout

44.82 + 0.42 = 45.24 IN PLAY



After THREE bullish breakouts, I didn't have any problem holding through "Ye Olde Knuckle-Biter," which went a bit below the Double Bottom breakout. The Bulls scored a fourth pattern breakout, the little white Bull Flag, then rallied to the targets. I sold at 45.27 as the last of the 45.18, 45.24 and 45.28 targets got MADE. The chart was so bullish, I was sorely tempted to hold out for a test of the bottom of 2011 Falling Wedge in the daily chart, which we knew came in at 44.883 yesterday, but I've learned to "Take profits, or at least some profits, when targets get MADE." We've all sat in winning trades, only to see our gains evaporate. I "coulda" held back half of the shares for the anticipated rally to 45.88, but with three targets getting MADE, I sealed the deal.



Lest any of us thinks that players didn't know that the bottom of the 2011 Falling Wedge came in yesterday at 45.88, look where the early afternoon rally ended, prior to a pretty decent selloff (the white down-sloping channel): 45.87.

For traders playing that last Channel breakout, either of the up trendlines coming off it would be good for stops, depending upon how loosely or tightly one would wish to play it.



Rallies back to broken support (in this case, the bottom of the 2011 Falling Wedge) are common, and are to be expected. The Bulls did a very admirable job getting there with all of those bullish breakouts in yesterday's trading, but couldn't manage a close above it.



Gain on the session: $6,350