FCX: Long-Legged Doji Star Hangman

From January 1st, on FCX:


"FCX finished 2011 breaking out of a Channel, successfully retesting the top of it on December 28 and 29 and moving a tad higher into the final gong for the year...

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)"





FCX has had a smart rally off the validation of support that we discussed back at the end of 2011. The stock has made it to, and through, both levels of Key Resistance that we examined.

Yesterday's session is a Long-Legged Doji Star Hangman the 48.96 high of which got close to the Symmetrical Triangle target of 49.28 that went IN PLAY off the Symmetrical Triangle breakout in early January. That candlestick "can be" a sign of a reversal and some pullback in a stock, especially after such a nice rally, and especially now that FCX is into the 2011 Falling Wedge resistance. At yesterday's high, FCX was up 70% of the early October, 2011 3-Close Bullish Key Reversal. Excellent rally!

Notice the two Gaps Up in October. Those came shortly after The Smackdown from the 2011 Falling Wedge breakdown and both got filled rather quickly, in November. Lots of willing sellers on that first rally attempt into resistance.

Notice also that the December 30 and January 10 Gaps Up have not been filled. In the autumn, we discussed the facts that (1) after a big Smackdown like FCX had, it would need time for some base-building, and (2) the stock likely would have difficulty making upside progress due to year-end tax loss selling. Once the tax loss selling was over with and a decent base had formed (the Symmetrical Triangle), FCX had a much better chance of a rally, as we've witnessed in January.



Bigger picture, FCX has rallied into the thick of the 2011 Falling Wedge resistance. Interesting that it nearly ran the gamut of the narrowing top and bottom of that wedge in yesterday's trading.

Viewed in the context of that big overhang of sellers, yesterday's Doji Star candle makes a lot of sense. Bulls who have been trapped inside the Falling Wedge and who sat on fairly sizeable losses during The Smackdown were saying things like, "Omigawd, I finally have a chance to get outta this thing at a break even. SELL!!!"

Additionally,some of the Bulls who have a nice gain from the recent rally began to take profits when they saw yesterday's rally fading.

Bullish news could cause the stock to pound its way right through all of that 2011 resistance to the left of the chart, but strictly based on the technicals (the overhang of sellers), that isn't likely. After a 70% run-up into this kind of substantial resistance, a selloff or some backing and filling would be more likely, and much healthier, technically.