FCX: 2011 Year-End

From FCX comments after the October 5 close:

"In the daily chart, FCX put in a Bullish Key Reversal candle on October 4, which also was one of Erik Hadik's (sp?) 3-Close Reversal candles, meaning that the stock put in a new low for the move, then reversed and closed higher than the closes of the three prior sessions.

After something like that, we want to see signs of follow-thru that suggest that some kind of low might be in, if not THE low for the move."

Although FCX finished the year with a loss of 39%, the October 4th Bullish 3-Close Key Reversal was THE low for the move off the early 2011 Falling Wedge meltdown.

The Bullish Key Reversal came only two sessions after the Falling Wedge target of 30.61 got MADE, on September 30. Stocks don't always reverse direction when a big target like that is achieved or approximated, but quite often they do, as was the case here with FCX.

After the kind of Smackdown that FCX had into the October low, we want to take a look at where we would expect the stock to find resistance on any rally.

Key Resistance:

Level 1 - 41.20 - 41.45 (the August lows, prior to the second Crash in the stock)

Level 2 - 46.06 - 46.20 (the lows of the early 2011 BIG Falling Wedge)



From October 8, "FCX: In Crash Recovery"

"As we approach year-end, there is a huge overhang of selling pressure from the initial crash from the 56.78 high of the Bearish Wolfe Wave to 41.20, which broke the 2011 Falling Wedge, and then nearer-term, from the second crash that occurred from the 48.60 high of the weak base that The Bulls tried to establish after the Falling Wedge breakdown, to the 28.85 low of the Bullish Key Reversal on October 4.

The Bullish Key Reversal low of 28.85 could end up being significant if it holds up because it would mean that any Bears waiting for the Summer, 2010 low of 28.35 to have a better retest would be disappointed.

In my view, The Bulls would do well to spend the remainder of 2011 establishing a nice base from which to launch a rally into all of that overhead resistance, which likely will be daunting. Year-end tax loss selling won't help, either. Some players will sell FCX and take the loss to offset gains in other stocks. The Bulls need to "have game" to attack the resistance.

The Bulls have some work to do, building good bases and breaking of them. The base-building process can be slow-w-w, but again, the Bullish Key Reversal looks good if it holds up."

The FCX Bulls made a decent attempt at a recovery, rallying to 43.48, or about the middle of Level 1 and Level 2 resistance, which is about as much as could be expected after the serious breakdown from The Early 2011 Falling Wedge. Absent great news on the fundamentals, stocks generally take time to recover and need to spend some time base-building.

For easier reading, I wrote some notes at the top of this chart describing "THE TELL" that FCX was in for some selloff in early November. When we're collecting our body of evidence while following the market, that kind of information can be very helpful when we can get it.

FCX finished 2011 breaking out of a Channel, successfully reetesting the top of it on December 28 and 29 and moving a tad higher into the final gong for the year. As I've said many times, breakouts of Falling Channels/Falling Wedges are my least favorite of the bullish breakout patterns, and this current breakout is yet another example of why. Once the stock breaks out to the upside, everything inside the Channel is immediate resistance and the stock often ends up going back for a retest, as it did here, and sometimes "walks down" the top of the Channel some more, which certainly isn't particularly bullish.

That said, The Bulls did their job in fourth quarter, holding the Bullish 3-Close Key Reversal low, knocking heads with The Bears during year-end tax loss selling and trying to establish a base for another rally attempt into Key Resistance.

As readers know, I'm a trader and primarily trade FCX off the intraday charts and I don't make predictions, but I like this stock and wish long-term shareholders all the best in 2012.

Happy New Year!