FCX: Short Squeeze

At Monday's close, the 8-Day RSI was the most oversold that it has been in at least two years. We always want to be careful about "oversold" conditions. Cheap can get a lot cheaper and crashes can occur from very oversold conditions. At the same time, we want to take advantage of a sharp reflex rally from oversold conditions if we can find reason to get long.



Gap Up openings in stocks that are bearish, like FCX is, are marked for a "Gap And Crap." That isn't how bottoms usually are made in a sharp downtrend like this one. More likely, there will be a wicked selloff in the stock, then an upside reversal.

I wasn't interested in buying into the gap, but I got interested when FCX didn't give back even 50% of the opening gap, and the exponential moving averages (EMA) started to turn bullish. I got long at 43.32, coming off White Data Point #4, for a play to the top of what looked to be a possible Bear Flag (the pattern in white) since it looked like The Bears were going to be squeezed a bit. I sold at 43.75 on approach to the early morning high.

"Expect patterns to resolve in the direction of the trend," which is bearish, and there was an unfilled gap yawning below.



FCX rallied to broken Double Bottom resistance, just above 44.00. The Bear Flag high was 44.00, then it broke to the downside. I wasn't interested in shorting, given the grossly oversold condition in the stock.



Hmmm-mm...The Bears weren't able to take the stock down after the Bear Flag breakdown. The Bulls strung it out at Horizontal Resistance (the horizontal red line) and looked like they wanted to make another bid for 44.00 resistance, and possibly higher. I got long again at 43.33.



Blah-h-h...I was looking for a much stronger rally, at least back to 44.00, not this meandering sideways-to-down in this channel, which at this point looked like it was going to break to the downside. "Expect patterns to resolve in the direction of the trend," and a fill of the opening gap still was a threat. I threw my second trade in at 43.40 and called it a day.



WHOA-A-A!!!

They saved the best for last, darn it. There's the wicked selloff and sharp upside reversal!

The Channel broke down and the opening gap got filled (and more) for a big shakeout of The Bulls, but look at that nice short squeeze of The Bears! They cleared the boards on that one.

The Ascending Triangle breakout near the end of the session put about 43.87 IN PLAY, just below 44.00 failed Double Bottom resistance, but the short squeeze was on and FCX managed to rally through that resistance for a gain of another dollar. If I had been watching and had gotten long the Ascending Triangle breakout, though, I would have sold when the 43.87 target got MADE.



Next resistance is the bottom of the broken 2011 Falling Wedge, currently at 45.884, not 44.884. I made a typo on the chart and am too lazy to go back and change it and download the chart again. LOL.



Gain on the session: $2,450