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

FCX - Conventional Wisdom

Coming into trading this week, following the S&P ratings downgrade after the gong on Friday, the futures were indicating a down opening and "conventional wisdom" was that the market would tank early, then stage a rebound and even close in the green on the session because the bad news already was factored in. The market already had experienced tidal wave selling, so it would be a case of "sell on the rumor of bad news...buy on the actual bad news (the actual ratings downgrade)."

That prediction sounded pretty good given that the market was so severely oversold, right?

Rather than play other peoples' predictions about what the market is going to do, though, we want to follow what the market IS DOING, as best we can.

At Friday's closing gong, what did we know from the chart?

1. Basis the daily chart, we knew that the bottom of the 2011 Falling Wedge, at 45.893, had been violated intraday, but that it held on a CLOSING basis, at 45.99.

2. Basis the weekly chart, we knew that 44.85 support at the bottom of the Kumo (Cloud) had been violated, but that FCX also recovered from that breakdown.

3. Basis the intraday chart on Friday, we knew that FCX had found a bottom at 44.03 and had broken out of a bullish Inverse H&S pattern. The target, just below 47.00, had gotten MADE.

4. Also basis the intraday chart on Friday, we knew that FCX had broken below a H&S Top and had failed a retest of the broken neckline (the white down arrow).

At yesterday's open, FCX was called Gap Down at about 44.15, so we knew at the open that:

1. The 45.893 support at the bottom of the 2011 Falling Wedge would be broken again.

2. The 44.85 support at the bottom of the weekly Kumo (Cloud) would be broken again.

3. The 44.03 low of Friday's bullish Inverse H&S Bottom would be tested right at the open, which was the only remaining nearby support level.

If "conventional wisdom" about a sharply down opening followed by a sharp rally was going to be right, 44.03 support, or there about, would need to hold for a short-term Double Bottom. Otherwise, there wasn't any support below that, so we were about to find out fairly quickly whether or not "conventional wisdom" would be right.

SHUFFLE UP AND DEAL ;)



Just before the open, I placed my order to buy FCX at 44.08, a little above Friday's low of 44.03 with a ver-ry tight stop in the high 43.80's. I was willing to give the stock a little wiggle room for a lower leg of a Double Bottom, but not much.

The early session low was 44.05, so my order at 44.08 got filled. FCX did rally sharply off the opening low, to 45.02. The "conventional wisdom" scenario was playing out fine. I was up nearly $5,000 on the trade (at White #2).

What I wanted to see from The Bulls was enough strength to fill the gap at 45.37 (the horizontal yellow line). What I did NOT want to see was anything more than a 50% or 61.8% of the early rally. Anything much more than that would suggest another retest of 44.03-44.05 Double Bottom support, which would mean a Triple Bottom. That kind of weakness would lack credibility. Triple Bottoms don't have a very good chance of holding, especially not in a stock in which there is no support whatsoever below the putative Triple Bottom.

I raised my mental stop to "anything below 44.30," which would be an unacceptable give back of the rally to 45.02 and would strongly suggest to me that:

1. The 44.03-44.05 Double Bottom was about to get broken.

2. "Conventional wisdom" about a sharp rally on the bad news about the S&P downgrade already being factored into the market would be wrong.

I threw the trade in when FCX printed 44.29. Yeesh..
After the Double Bottom broke, FCX:

1. Broke down below a Falling Wedge (pattern in white)

2. Broke down below a Symmetr4ical Triangle (pattern in orange)

3. Broke 43.08-43.10 Horizontal support (horizontal red line)

4. Failed a retest of broken horizonatal support, at 43.08 (first red down arrow)

5. Staged a weak late day rally to 43.08-43.10 resistance, which fizzled.

6. Finished the session down nearly 9%.

So much for "conventional wisdom," eh?

Market Lesson:

Follow what you SEE, not what you HEAR others predicting.

Now I will slap myself for not shorting those pattern breakdowns.

Slap! Slap! SLAP!!!(Ouch! Ouch! OUCH!!!)



First Resistance on any rally is 43.08-43.10 in the intraday chart above (horizontal red line).

Second Resistance is 44.85, the bottom of the Kumo in the weekly chart (see Sunday's post for that chart)

Third Resistance is the bottom of the 2011 Falling Wedge, which is roughly at 45.88



Gain on the session: $900. I really "shoulda" shorted all of those breaks of support, but I'm glad to have made anything being long a stock that was down nearly 9% on the session. Yeesh...

Market Lesson: "Don't get emotionally involved with stocks. Want what Ms. Market wants." I just plain didn't wanna short it. My loss ;(

FCX: Bearish Tidal Wave

As we know, when targets get MADE, that doesn't mean that a stock can't go higher or lower than the target. It just means that the target for that particular pattern has been achieved. In this particular case, after the Bearish Wolfe Wave target got MADE...



...it turned into something more akin to a Bearish Tidal Wave, destroying everything in its path. From the Bearish Wolfe Wave "Fakeout/Breakout," nine months worth of support was taken out in about two weeks' time. UGH. That's the purpose of a Wolfe Wave, though, to get the proverbial "everyone" wrong-footed, then ripping in the opposite direction of the fakeout.

When stocks get beat up this badly, they usually need time to regroup and to build a base like FCX did with the Bullish Inverse H&S in March, the Bullish Ascending Triangle in April, and the Triple Breakout Through Triple Validated Resistance in late June. After a bludgeoning like this, a "V-shaped" bottom certainly is possible, where the stock goes straight down and then straight up for awhile, but those bottoms are uncommon.

While we always want to be careful about trying to "catch a falling knife," where a stock is selling off below all nearby support, which FCX was doing on Friday, it certainly is reasonable to look for areas of possible support, for at least an oversold bounce, which is what I did on the early selloff.

As we can see in this chart, the bottom of the 2011 Falling Wedge came in on Friday at 45.893, so I made my inital purchase at that level, looking for it to provide support. FCX did manage to stick the close at 45.99 at the final gong, but it was a wild ride between hither and yon getting there, let me tell you! LOL.



The next support that I was looking at was the bottom of the Kumo (Cloud), basis the weekly chart, at 44.85.



The bottom of the 2011 Falling Wedge, at 45.893 didn't hold. FCX sold off to an early session low of 45.43 (yellow up arrow) so my trading plan was busted. I sold my shares at 46.15 into the first bounce into the inverted EMAs (yellow down arrow) for a decent gain and planned to buy my shares back if FCX tested the bottom of the weekly Kumo (Cloud), at 44.85.

Be careful what you wish for! I got back in at 44.82, but nearly was stopped out at 43.82 when FCX sank to 44.03. UGH. I sold into the next rally, at 45.37, looking for the stock to establish a neckline of an Inverse H&S bottom, or a flat top for an Ascending Triangle, with a plan to buy back the shares again near the 44.85 bottom of weekly Kumo (Cloud), if I could get them.

I got back in at 44.88. That was the money trade. The Right Shoulder of the Bullish Inverse H&S pattern was a "nested" Bull Flag (the pattern in orange), lending strength to the pattern. The H&S pattern is very unorthodox. The volume isn't right. The Right Shoulder is wider than the Left Shoulder, which it "shouldn't" be. As we've seen many times, though, those often work out fine, as this one did. If it had failed after the breakout, I would have stopped the trade out below the low of the Right Shoulder (which also was the low of the Bull Flag, in orange).

The breakout put a target of just under 47.00 IN PLAY. It was a breakout against the trend, and those are less likely to get MADE, so I sold very early, at 46.20, and played it a couple of more times afterwards, but the Bullish Inverse H&S target just below 47.00 did end up getting MADE at the afternoon high of 47.1556.



Gain on the session: $12,400

DO And DNDN: Smackdowns And Crashes

We looked at DO two weeks ago when we practiced calculating slopes. At that time, DO was coming off Data Point #4 of a Bear Flag/Rising Channel. The Rising Wedge (pattern in blue) targets had MADE, but 61.62 still was IN PLAY from the early May Rising Channel Breakdown.



The recent Bear Flag/Rising Channel resolved to the downside, like the two patterns that preceded it. Notice that the 61.57 target IN PLAY on this breakdown was within five cents of the 61.62 target already IN PLAY from the May 2 breakdown. There never are any guarantees with targets getting MADE, but when more than one pattern breakout or breakdown targets a similar price area, the chances that the target will get MADE, or reasonably approximated, are improved.

The three pattern breakdowns since the initial one, at 73.94 on May 2, provided very good opportunities to sell and/or sell short the stock to avoid losses and/or profit from the selloffs and the recent Smackdown.



This chart of DNDN is yet another example of why I ignore news on the fundamentals, including what CEOs and analysts say about a stock, and LOOK AT THE CHART.

If we're long a stock that is in a nice uptrend with no apparent problems and it gets "shot out of the sky" on bad news, there's nothing can be done about it except sell the breakdown. That's an unavoidable disaster.

The crash in DNDN was an avoidable disaster. UGH.

DNDN broke out to the upside on July 6, on good news about "reimbursement decisions." The upside Fakeout/Breakout turned into a "Knuckle-Biter" when the stock CLOSED back below the breakout, then DNDN went all-ll the way back and retested the bottom of the Symmetrical Triangle on July 18. It stuck the close at 38.22, just a hair above the trendline. Sloppy, but trendline support held and the stock went up to challenge 39.22-39.50 resistance again.

For four sessions, DNDN kept trying to get through that resistance, but without success. I played it on July 22, but threw it in after the stock failed at 39.50 and started selling off.



On July 25, DNDN fell back and CLOSED below the Symmetrical Triangle and on July 27, it CLOSED below the July 18 low. What a nice short that would have been, huh?! That was a technical breakdown, six trading sessions before disaster struck on the bad news about "reimbursement problems." UGH.

Market Lesson: Question the "good stuff" that CEOs, analysts and the media, in general, have to say about a stock when it breaks down, technically. If the news really is that good, why is the stock breaking down? Prior to stocks like DNDN crashing (the Symmetrical Triangle breadown was six days earlier), this old market saw comes in handy:

"First the (bad) chart...then the (bad) news."

FCX: Bearish Wolfe Wave

Review of The Bearish Wolfe Wave possibility, from yesterday morning:

"Look back at that Bearish Wolfe Wave, where we got "The Tell" on April 11, at 56.64 and again at 56.33, that all was not well with FCX. In the current time-frame, we've got a strong directional Lead-In off the late June Triple Breakout, just as we had in the early spring, and we've got a similar Bearish Rising Wedge possibility.

Bearish Wolfe Waves usually have a Wave 5 "Fakeout/Breakout." Back in April, FCX had TWO "Fakeout Breakouts." Yesterday's rally fell shy of the putative top trendline by about five cents, so it wasn't a "Fakeout Breakout," but it came close.

A break of trendline #2-#4 would warrant some caution, as would a break of the 54.77 release of earnings low."

We can't say that we weren't prepared for yesterday's action!

My apologies for the chart looking like someone threw a pizza at it, but I ran out of space on it and needed to make room for the Lead-In of the Bearish Wolfe Wave. If you notice, the current pattern looks very similar to the Bearish Wolfe Wave back in the early spring:

1. Both have a strong directional "Lead-In" to the pattern (both were big up moves), which is required of a Wolfe Wave.
2. Both had patterns (Rising Wedges) that were in the SAME direction as the Lead-In, which also is required of a Wolfe Wave. Both the Lead-In and the pattern that followed it (the Rising Wedge) were UP.
3. The Wave 5 "Fakeout/Breakout" that puts the proverbial "everyone" wrong-footed was a Double "Fakeout/Breakout" in the spring. In the current time-frame, we didn't get the "Fakeout/Breakout," which normally is seen in these patterns. We got a simple failure at, and validation of, resistance at the top of the Rising Wedge at the Wave 5 high, on Tuesday (red arrow).

The Target Line, once the pattern broke down crossing 55.2622, is derived by connecting the high of Wave #1 with the low at Wave #4, then continuing that trendline on down. It came in yesterday at 54.23. The session low was 54.26, so I consider that target MADE, it was so close. That doesn't mean that FCX can't go lower. It just means that if I were short the stock, which I tried to be on the rally to 55.62-55.64, I'd "take profits, or at least 'some' profits when targets get MADE."



Since we didn't have the typical Wave 5 "Fakeout/Breakout" in this Wolfe Wave, I took a chance that the lower trendline (55.2622) of the Rising Wedge would be support on the morning selloff, and got long the stock right there. When it dropped to 54.90, which was a significant breakdown, I threw it in on the next rally for a ver-ry small gain and looked to get short if FCX rallied in the Bear Flag (pattern in white) to the horizontal resistance at 55.64, which also was the top of the inverted exponential moving averages, the 34EMA, which was at 55.62.

So, there were at least THREE solid reasons to short there:

1. 55.64 horizontal resistance - that was support at the open. Once broken, "former support 'should be' resistance."
2. 55.62 top of the inverted EMA resistance
3. The Bear Flag pattern, which after the severe drop (which is the "flag pole" for the flag), "should be" a bearish continuation pattern. This is a short-term chart (5-Minute) and the short-term trend was down. Expect patterns to resolve in the direction of the trend in the time-frame at which we are looking.

I placed my order to short 2,500 shares at 55.60, just below that resistance, but I didn't get filled. Apparently, a lot of other folks had the same idea that I did because the high at the top of the Bear Flag only was 55.57, so the stock didn't quite get there. That's fine. Sometimes we don't get the entry that we want, but I wanted to point out that "body of evidence" because it generally is a real nice place to short when we see it.



In this particular case, when FCX broke the bottom of the Bear Flag AND took out the 54.90 morning low AND took out the 54.77 release of earnincgs low that we discussed yesterday morning, it was marked for a fast trip to the Bearish Wolfe Wave target line, at 54.23 (#6 on the daily chart). That's a hallmark of a Wolfe Wave. Usually a sharp move in direction OPPOSITE Wave 5, where the proverbial "everyone" is caught wrong-footed, expecting higher prices. Nice trade for anyone who shorted it.

Notice the interplay of price with the 13...21...34 Inverted EMAs. In Tuesday's session when the EMAs were "in gear," they acted as support. Yesterday, they were resistance. When FCX rallied off the opening low of 55.64, it got smacked after three 5-Minute bars, right where the EMAs were "bunched," after having rolled over to the downside. At the top of the Bear Flag, the stock failed right below the 34 EMA, at 55.57. For the remainder of the session, the best that FCX could manage was weak rallies to the 21 and 13 EMAs, then finally, a failure at the 34EMA near the gong.

The Bulls need to suck down LOTS of spinach in the locker room this morining, before coming out onto the field. LOL.



Gain: lunch money ;)

I'm going to take a break from posting for awhile. Between my cursor jumping around and driving me crazy while I'm trying to type this stuff out, and my strained old eyes killing me while I'm trying to see this little print, I need a rest. LOL.

In the interim, practice...practice...practice. I hope that I've shown you that the market isn't just some "random walk." I didn't see anything "random" about the DOUBLE breakdown in the daily chart yesterday, at 55.2622 and at 54.77, the DOUBLE resistance at 55.62-55.64, or FCX getting to within three cents of the 54.23 Bearish Wolfe Wave target. It certainly isn't easy, but if we collect our "body of evidence" and try our best to FOLLOW what Ms. Market is doing, we'll do alright ;)

Best of luck to all of you with your trading! I'm outta here for awhile ;)

FCX: Yesterday's Triple Breakout

We knew going into trading yesterday that, based on the 144/233 RSIs being at Bullish Synchronicity, a Buy Signal from that particular indicator would be generated if FCX could print above the prior session high of 55.98 and CLOSE higher on the session.

We got that Buy Signal at the open, but the open also was a possible "Gap And Crap," which means that the stock opens high, then fizzles to fill some or all of the gap, or even go lower and stage a reversal to the downside.

After FCX filled the gap yesterday morning, it had a nice little rally, to White #1. Because the chart has been bullish and because we also got the Buy Signal at 55.99 from the 144/233RSI, I was looking for an opportunity to get long the stock and that rally looked like a low was in, after the gap fill. I got long at 55.68 during the formation of the Symmetrical Triangle (pattern in white).

That Symmetrical Triangle "morphed" (changed) into an Ascending Triangle (pattern in orange) that had nearly identical highs: 55.79 and 55.80. That gave us two potentially bullish patterns, a "nested" Ascending Triangle, meaning that the Symmetrical Triangle now was "nested" within the Symmetrical Triangle. The breakout put 56.00 IN PLAY.

Notice how, during the pattern formations, the 13, 21 and 34 EMAs got "in gear,"(in their proper sequence) with the fastest 13 above the 21 and the faster 21 above the 34.

Math for the Ascending Triangle target:

55.79 - the more conservative of the 55.79 and 55.80 highs
55.58 - the low

55.79 - 55.58 = 0.21 points of upside on a breakout

55.79 + 0.21 = Target: 56.00 IN PLAY

Targets don't always get MADE, as we know. This one initially fell a little short, at 55.98. It's a trader's decision, what they want to do about that. The chart looked bullish to me, so my decision was to hold, and raise my mental stop loss, to lock in a winning trade, albeit a small one on a stop out.

After the rally to 55.98, another Ascending Triangle emerged (the pattern in yellow). If that could break out, it would put 56.18 IN PLAY, just above the early session high of 56.14.

Notice how, during the formation of this pattern, FCX was "hugging" the EMAs. At the lows (Yellow #2 and Yellow #4) FCX found support at the 34 EMA. Lovely chart structure, at this point in the session, with the three patterns and the EMAs "in gear" on the upside, supportive of a rally.

Math for the second Ascending Triangle

55.98 - Identical highs of the pattern
54.78 - Low of the pattern

55.98 - 54.78 = 0.20 points of upside on a breakout

55.98 + 0.20 = Target: 56.18 IN PLAY



After FCX broke out of the second Ascending Triangle, which now was a Triple Breakout on the session, I had a decision to make. While the chart looked bullish and while "nested" patterns and multiple pattern breakouts can be VERY bullish, given that the 56.18 target was so near the session high of 56.14, I faced the possibility of a Double Top, somewhere near 56.14. I sold my position on approach to 56.14, to defend against that Double Top possibility, and especially because the target of 56.18 was only a few pennies higher, and it was the last of the three pattern targets.

"Take profits, or at least 'some' profits, when targets get MADE."

"Don't step over dollars to pick up a few pennies."

As we can see from what ensued after I sold, the intraday Triple Breakout was, indeed, VERY bullish. The target of 56.18 got MADE and was exceeded by a good bit on the rally to 56.78.



In "The Battle For The Top Of The 2011 Falling Wedge," it once again is Advantage: The Bulls, for closing the session out above the pattern.

One of the things that I especially like about technical analysis is that it helps to remove our emotional bias if we're committed to trying to see "what is," not "what we want to see."

"What is," as far as yesterday's candle in the daily chart is concerned, is a "possibly" Bearish Long-Leggetty Doji Star, the high of which got rejected at the top of a "possible" Bearish Rising Wedge, seen in the next chart.





We never want to go seeing an Indian behind every tree, scaring ourselves half to death about some dire possibility of getting ourselves scalped by something that gets trotted out in the news, but we do want to know where we might be in trouble.

Look back at that Bearish Wolfe Wave, where we got "The Tell" on April 11, at 56.64 and again at 56.33, that all was not well with FCX. In the current time-frame, we've got a strong directional Lead-In off the late June Triple Breakout, just as we had in the early spring, and we've got a similar Bearish Rising Wedge possibility.

Bearish Wolfe Waves usually have a Wave 5 "Fakeout/Breakout." Back in April, FCX had TWO "Fakeout Breakouts." Yesterday's rally fell shy of the putative top trendline by about five cents, so it wasn't a "Fakeout Breakout," but it came close.

A break of trendline #2-#4 would warrant some caution, as would a break of the 54.77 release of earnings low.



Gain: $1,100

US Steel (X): H&S Top Target

From June 17, on US Steel (X):

"After closing below the 43.86 low of the Triple Top in US Steel (X) on June 3, The Bulls made three attempts to get back above it and failed at 43.84, 43.85 and 43.80 (the three red arrows). Off that TRIPLE resistance, the Triple Top target of 41.43 got MADE in yesterday's session..."



It took awhile, but at 1.42PM this afternoon, with the print of 40.39...



The H&S Top Target that has been IN PLAY since mid-April finally got MADE.

FCX: Bid A Small Slam In Spades

Looks like we've got a real Bull vs. Bear struggle in FCX! At yesterday's close, it's Advantage: The Bears, for CLOSING the stock back below the 2011 Falling Wedge.

Ultimately, it really doesn't matter if FCX closes slightly above, or slightly below, the top trendline of the 2011 Falling Wedge. The trendline is declining, so theorectically, weeks in the future, we could be looking at closes above the trendline, but with lower prices as the stock "walks down the trendline." What's really important is for The Bulls, at some point, to make a "higher high" than the 56.68 release of earnings high. That doesn't have to be today or tomorrow.



We haven't looked at the Fibonacci Sequential Measures of Relative Strength in awhile, the 8...13...21...34...55...89...144. The "Buy Signal" coming out of Bullish Synchronicity in late June was a very nice signal, and it coincided with the "Triple Breakout Through Triple Validated Resistance" in FCX. Remember that indicators don't TELL US to buy, or to sell. Indicators don't have a clue what the price chart looks like. They just do what they do best: they "indicate."

Coming out of Bullish Synchronicity in late June, these RSIs we're indicating, "We're good to go on the upside if the price chart has got anything." The price chart was two sessions away from the "Triple Breakout Through Triple Validated Resistance" and was needing a print of 49.66 for the "Buy Signal" from this indicator to "kick in."

View indicators simply as "giving us information." They aren't TELLING US what to do. If we've ever played the card game of bridge, if our partner opens with a bid of One Spade, our partner is not TELLING US to bid game, or even to make a bid at all if we're holding junk. Our partner is giving us this information about his or her hand: Partner has 4 or 5 spades, and at least 13 high card points. Now it's up to us to look at our cards (as we would look at a chart, based on information from a technical indicator), then decide what we want to do about our partner's bid of One Spade. Partner doesn't know what cards we've got when he or she indicates his or her hand to us, just as this RSI chart didn't know what "cards" the FCX price chart was holding.

No analogy ever is entirely apt, but in this particular example of these RSIs vis-a-vis the price chart in late June, the FCX price chart was holding a blockbuster "hand" of cards (the three "nested" patterns).

Make at least a Small Slam bid of SIX spades. LOL.



In the current time-frame, the 34 and 55 RSIs are in gear on the upside, so we're skipping down to the last RSIs in the sequence, the 89...144...233. Comments are on the chart.

FCX: Ascending Triangle Breakout Thru Quintuple Resistance

Referring to Thursday's trading:

"What I was seeing in the chart was horizontal resistance at about 55.50 and the inverted, declining Exponential Moving Averages (Fibonacci 13, 21 and 34) up at the same area, the highest of which (the 34) was around 55.47. Given how unacceptably (to me) FCX was performing on "good news," I shaved my expections a bit and threw the trade in at 55.42, below 55.47-55.50 resistance"

That 55.50 area became Quintuple resistance (the five white down arrows). Notice that after the selloff from the fourth attempt to get through resistance, the stock held at the 13, 21, 34 Exponential Moving Averages (EMA's), which now were "in gear." If you look at yesterday's intraday chart, at where I sold into the inverted EMA's, the faster 13 was below the 21, and the 21 was below the 34, indicating that the near-term trend was down.

While FCX was trading sideways on Friday, below the Quintuple Resistance in the chart above, and while it also was forming an Ascending Triangle, the EMA's had a chance to flatten out and get "in gear," meaning that the EMA's became properly threaded, with the fastest 13 above the 21, and faster 21 above the 34. I bought FCX at 55.34, coming off that bounce (up arrow) off the EMA's.



When the stock broke out, my initial target was the 55.90, below the 55.91-55.92 lows (the horizontal yellow line) of the Decending Triangle (pattern in yellow). That Descending Triangle broke down in Thursday morning trading after the release of earnings, putting 55.16 IN PLAY, which in addition to the gap at 55.12, was why I bought FCX on Thursday at 55.15, expecting that area to be support. As we know, it wasn't support, which is why I threw the trade in for a $675 gain, below the 55.47 - 55.50 resistance.

Math for the Descending Triangle:

56.68 - High of the pattern
55.92 - The more conservative of the 55.92-55.91 lows (it's fine to use 55.91)

56.68 - 55.92 = 0.76 points of downside on a breakdown

55.92 - 0.76 = Target: 55.16 IN PLAY, which got MADE a penny above my Thursday entry, at 55.15.

Regarding the Ascending Triangle breakout through Qunituple Resistance, in addition to the target of 55.90 (Descending Triangle Resistance), 56.23 also is IN PLAY.


Math for the Ascending Triangle breakout:

55.50 - the most conservative of the five highs of the pattern (five down arrows)
54.77 - low of the pattern

55.50 - 54.77 = 0.73 points of upside on a breakout

55.50 + 0.73 = Target: 56.23 IN PLAY

As we can see from this second chart, the move up in FCX after the breakout was a slow, grinding affair on low volume. YAW-W-W-WN... The afternoon should have been a slam dance at least to 55.90 resistance (horizontal yellow line), but it became a war of attrition between The Bulls and The Bears to see who could bore the other to death first.

I'm a-gittin' old, and by 3:30PM, I not only was bored to death, after seeing that The Bulls had all afternoon to get to 55.90, and seeing the possiblility of the stock rolling over to the downside into the close and my paper gain evaporating, I sold at 55.66.

I don't like excuses for that kind of miserable performance from The Bulls on an Ascending Triangle breakout through Quintuple resistance, but there at least was a technical reason for Friday afternoon's war of attrition...



...which was the battle for control at the top of the 2011 Falling Wedge in the daily chart. That top trendline came in on Friday at 55.636, so The Bulls pulled off a victory at the close of 55.67, albeit on a squeaker ;)

The Ascending Triangle targets of 55.90 and 56.23 remain IN PLAY as long as FCX trades above 55.50. Anything below that is "Ye Olde Knuckle-Biter" for The Bulls. Anything below the rising line of the Ascending line is a failure of that particular pattern, which could end up morphing (changing) into something else later on.

The upside targets listed on this daily chart are back IN PLAY, as long as FCX trades above the pattern. Anything back below it is "Ye Olde Knuckle-biter" again.




Gain on the FCX trade: $800

Slopes, Patterns And Trendline Validations

THE BULL FLAG

Calculating a slope really is very simple. We'll start with the Bull Flag at the left of the chart, at Blue #1.

Once we have two data points, which would be Blue #1 and Blue #3, we subtract the two in order to get the distance between them, so 75.40 - 74.15 = 1.55 points. In order to find the slope of that trendline, which means the rate at which the trendline is declining each session, we need to count the number of days that there were between the two data points, which was nine days.

We then divide the distance between our two data points, which was 1.55 points, by the number of days between those data points.

1.55 divided by 9 = Slope: 0.1722, or a little over seventeen cents.

Guess what? IT'S THAT SIMPLE! We all now know how to calculate a slope!

Each session, we now know that the trendline is declining by 0.1722 and we can subtract that amount each session, beginning with 74.15, which is Blue #3. We don't need to go all the way back to Blue #1.

So, for example, the trendline for the session after Blue #3 would be:

74.15 - 0.1722 = Trendline at 73.9778 for the next session after Blue # (74.15), which would be February 4.

IMPORTANT NOTE:

If the trendline is steep, like this one, it's important to carry out the slope enough decimals, i.e. the full 0.1722, and not round it off to 0.17 (seventeen cents), or the calculation for where the trendline is each session can be thrown off quite a bit.

For better accuracy, it is a good idea when price is coming close to a trendline to count the days since Blue #3, muliply that number times our slope of 0.1722, then subtract it from Blue #3.

Example:

When the stock was breaking out, it was important to know where that trendline Blue #1-#3 was! I put comments for February 14, 15 and 16 on the chart, for easier viewing.

After the upside breakout, February 15 was a "Ye a Olde Knuckle-biter" close for The Bulls, with the stock closing back below the breakout, leaving them wondering if they had a valid breakout, or not. The only way for The Bulls to know in the next session, February 16, whether or not they had a valid breakout, was to know where the trendline came in on February 16. The Bulls needed the stock to CLOSE back above it.

Again, for accuracy, it's better to do a full calculation, rather than a daily subtraction, because those "Knuckle-biters" are a key juncture for decision-making: Do we want to stay long on a SECOND close back below the breakout?

February 16 was the 9th session since we established the slope of 0.1722, at Blue #3. Not Blue #1. BLUE #3.

9 days X 0.1722 = 1.5498 points, subtracted from BLUE #3 (74.15),not Blue #1.

74.15 - 1.5498 = Trendline at 72.60002 on February 16.

We can see how helpful that calculation is when we look at the February 16 candle. The stock open at 72.78, came back and planted a foot just about smack on the 72.60 trendline, validating it as support (the session low was 72.56), then took off to the upside and CLOSED well above the breakout.

That kind of information is VERY helpful. Buying the stock near that 72.60 trendline on February 16, or buying it after it opened at 72.78, went down and validated the trendline as support, then printed 72.79, a penny above the open, was an EXCELLENT entry into the stock.

Daytraders love that kind of setup. The "fast down" from the opening price (72.78) to validate a trendline, or to fill a gap, then a print of 72.79, above the opening price...they're all over that one!

We can see from the chart that, with the exception of the February 22 black candle, the targets of 75.70 and 79.77 got made handily, with thirty-eight cents extra on the upside, to the 80.15 high, on March 1. That is not always the case. There's no "always" in the stock market. Be aware of that. Targets just are what the pattern measurement suggests (math for the Bull Flag is at the bottom left of the chart), and are "what we're aiming for."

Note that the Long-Leggetty "Bearish" Doji Star of February 24 was NOT bearish. We see a lot of those single-day bearish-looking candles, like the Gravestone Dojis that we looked at in ARIA, which also were not bearish.

We'll stop here for now. That's a lot of information to absort. The next installment, which I'll do at some point in the future and add to this post, will be on The Channel, which begins at Black #1, on February 11. There are some additional notes on this chart regarding that pattern, and the Bearish Rising Wedge pattern, but I still need to review it to make sure that I've got the numbers right.

The above information at least will get you started on calculating slopes, calculating pattern targets, and understanding the importance of validated trendlines.

EDIT: I found a couple of math errors on the Channel pattern in the middle of the chart, so I've updated the chart as of 7:20PM EDT July 24, 2011 to reflect the corrections.

FCX Earnings: "Ye Olde Knuckle-Biter"

As readers know, the only thing that I care about on the earnings, or about anything else to do with the fundamentals, like analyst upgrades/downgrades, is the market's RESPONSE to them. Knowing the particulars isn't going to help me to make a trading decision.

The general consensus seemed to be that the earnings were "good." Some folks thought "very good." Knowing that doesn't help me to make a play. Looking at a chart does.

Knowing that we've had an upside technical breakout of the 2011 Falling Wedge, I was looking this morning for an opportunity to get long the stock if I thought that I had an entry that seemed reasonable. When FCX sold off on the "good news," that looked to me like profit-taking after the roughly 20% run-up that the stock has enjoyed, prior to earnings, during which time seven pattern targets in the daily chart have gotten MADE (more in the intraday charts).

"Buy the rumor of good earnings...sell the actual release of earnings."

Again, given that the recent technical breakout in the stock was bullish, where would it seem "likely" that FCX would get a bounce, after the early selloff, if it were going to get a bounce at all? The unfilled gap at 55.12 looked like a strong possibility for a bounce, so I placed an order to buy 2,500 shares at 55.15, slightly above the gap, in case it didn't get filled entirely. It didn't. The initial morning low was 55.21, just above my order, then FCX took off and rallied $1.48, to 56.68.

"The best laid plans of mice and men." CURSES!!!

After that rally, Ms. Market gave me another chance to have the stock at my order of 55.15, but I wasn't sure that I wanted it after seeing the stock sell off that much, from the 56.68 high. "Be careful what you wish for." It still was early in the session, though, so I went ahead and took the trade, but I wasn't interested in any nonsense, like seeing stock go very much below that 55.12 gap.

After filling the 55.12 gap, FCX continued to sell off, down to 54.77. UGH. That wasn't what I was "wishing for" at all. My expectation in the trade was for the 55.12 gap to get filled, then for the stock to rally smartly off that gap fill if the RESPONSE to the "good news" on earnings really was something "good." My plan wasn't going well at all, with the stock about eighty cents below the top of the 2011 Falling Wedge, so my trading plan became "Get outta the trade with the best gain that you think you can get, based on what you're seeing in the chart. Stop it out for a loss below 54.77."





What I was seeing in the chart was horizontal resistance at about 55.50 and the inverted, declining Exponential Moving Averages (Fibonacci 13, 21 and 34) up at the same area, the highest of which (the 34) was around 55.47. Given how unacceptably (to me) FCX was performing on "good news," I shaved my expections a bit and threw the trade in at 55.42, below 55.47-55.50 resistance. The afternoon highs after that were 55.55 and 55.51, so I "coulda" squeezed a little more out of the trade, but I was being mindful of what Ms. Market taught me on Wednesday about being greedy. I also "coulda" made a play for the top of the 2011 Falling Wedge, at 55.679, but I wouldn't have gotten it. LOL.



The final RESPONSE on the session to the release of earnings was a CLOSE back below the 2011 Falling Wedge, so The Bulls have a "Knuckle-Biter" on their hands, and the upside pattern targets go ON HOLD unless/until the stock can break out again above the top trendline. I don't make predictions about whether or not it will or it won't, or predictions about anything else, for that matter. I just try to play the market as best I can, and yesterday, the best that I could do was to throw the trade in on a "vote of no confidence" that the stock would be able to manage a CLOSE back above the breakout. It didn't.

"It ain't over 'til it's over." Tomorrow is another day...



Gain: $650

FCX And SLW

Posted on the Yahoo FCX Board at 7:41AM yesterday morning:

"FCX currently is BID: 56.61...ASK: 56.70. If that holds up, Target #7, 56.49, from the June 28 Triple Breakout Through Triple Validate d Resistance will get MADE in pre-market (the upside targets have been listed at the upper right on my charts since the breakout)."

I really have to laugh at myself sometimes. The 56.49 target got MADE in both pre-market and regular trading, but without me selling into it, as I planned to do. UGH.

When I saw that opening indication, I didn't place an order in pre-market to sell at 56.49 the 1,000 shares that I was holding. I decided to wait to see if it opened even higher, for a better gain. Right before the open, the indication was BID: 56.50...ASK: 56.52. Fine. I placed my order to sell at the 56.50 bid.



Oops!

I know that it doesn't seem possible that my order, once again, was the exact high for the session and that my order once again DIDN'T get filled, but there you have it. I no longer am "starting to get paranoid." I am totally paranoid now. LOL.

To compound the stupidity of not selling in pre-market, or not placing a market order to sell at the open, I didn't even look at the order status for several minutes into trading, to see if I got filled. I just assumed that I did! As the kids say, "Duh-h-h-h..."

Oh, well. That stupid mistake cost me about $450. I yanked the sell order for 56.50 and sold for much less. Gr-r-r...

We never want to "Revenge Trade," trying to get back at Mean Ol' Ms. Market. She doesn't care, and revenge trading can turn into a much bigger mistake, but we also want to "get over it" and see if there's another opportunity based on something of substance, not based on our emotions.

We knew yesterday morning that the top of the 2011 Falling Wedge came in at 55.704, so when FCX continued to sell off, I put in an order to repurchase my 1,000 shares at 55.71. I got filled, but I didn't like the drop to 55.47. As I said yesterday, we can't expect exactitude from technical analysis, but that move down below 55.704 was a little sloppy for my taste. I sold the shares for about a $350 gain, getting back most of the $450 that I lost on the first sale, due to my own stupidity.

Market Lessons:

1. Sell when the opportunity presents itself (as it did in pre-market).

2. Don't be greedy when a target gets MADE, or is reasonably approximated (I got greedy when I saw the early opening indication that was higher than the target price).

3. Slap yourself upside the head three times when you do something stoooopid, like I did yesterday.

Slap! Slap! SLAP!!! (ouch! ouch! OUCH!!!...that third slap was kinda hard).

I'm flat FCX (no position) going into earnings this morning.



On Monday, after the 40.015 Kumo (Cloud) target got MADE, SLW finished the session on a "possible" Bearish Doji Star hangman. That was followed up with a Bearish Engulfing pattern on Tuesday, suggesting a retest of the 37.20-37.14 neckline breakout (or, top of an Ascending Triangle, if you prefer that).

As we discussed on the upside breakout, Breakaway Gaps, especially out of a pattern, are much more bullish if they DON'T get filled. The purpose of them is not to allow anyone to have the stock at prices below the breakout.

Yesterday's Gap Down selloff got halted at 37.35, just about smack on the 8-day Tenkan-Sen. The Breakaway Gap was not filled. SLW turned higher and staged this upside screamer, a rally of nearly 6%.



Whoa! Quite a comeback!

On a rally like this, the recent low and the recent high (horizontal lines) represent what is called nearby Horizontal Resistance. If the low end of Horizontal Resistance is thick in terms of width, that suggests that the rally might at least take a breather there, or might put in a short-term top due to the number of players who are lined up there and who want to sell near where the stock broke down.

"The thicker the resistance, the greater the resistance is expected to be."

As we can see, there wasn't a lot of price congestion (resistance) at the 38.92 low end of Horizontal Resistance, and SLW rallied right through the band toward its high, at 39.53.

Smokin' rally, but after charging higher nearly 6%, SLW looked due for at least a breather, so I placed an order to short at 39.47, in case it didn't rally all the way to 39.53, and scalped a quick gain of $500. I didn't want to stay real long on a strong rally like that. SLW didn't give back much, and closed near the high of the session.



I didn't have any thoughts of revenge in my mind when I scalped that $500 SLW trade. Honest. It just "happened to be" roughly the same amount that I didn't get on the FCX trade when "they" didn't fill my 56.50 order to sell ;)

FCX: 2011 Falling Wedge Breakout

Since mid-May, FCX has exhibited a penchant for breaking out of patterns through multiple iterations of validated resistance:

Ascending Triangle Breakout Through Quintuple Resistance (May 25)

The Ascending Triangle is the pattern formation below the five red arrows. Although the pattern was rather skimpy, notice that the Bullish Morning Star and the Bullish Island Reversal candle were "nested" within the pattern. Those were indications that if the stock could break out through QUINTUPLE Resistance, it could be packing some punch on the upside, and indeed, it was.

RESULT: FCX went on a four-session successive Gap Up screamer and the 52.28 Ascending Triangle target got MADE with no problem. The rally ended at 52.70, within four cents of the top of the Falling Wedge that began on April 8 (Black Trendline #1-#3), for the first validation of that trendline as resistance.

Triple Breakout Through Triple Validated Resistance (June 28)

There were two more validations of resistance (red arrows) at the top of the April 8 Falling Wedge, which also were the highs (Purple #1 - #3) of a "nested" Symmmetrical Triangle (pattern in purple). The Falling Channel, in blue, was another "nested" pattern within the Falling Wedge.

As with the Bullish Morning Star and the Bullish Island Reversal in the May Ascending Triangle, these "nested patterns" within the much larger Falling Wedge pattern also were indications that the stock could be packing some punch if it could break out of the patterns, above TRIPLE validated resistance.

RESULT:

Six of the upside targets listed at the upper right of the chart got MADE (there were additional upside targets MADE off the intraday charts) and FCX came within eleven cents of Target #7 (56.49) in yesterday's breakout rally, seen in the next chart.





Falling Wedge Breakout Through Triple Validated Resistance

Yesterday's breakout above the 2011 Falling Wedge was the third time in two months that FCX has broken out of a pattern through multiple validations of resistance. While there ALWAYS is a chance that any breakout "could be" a Fakeout/Breakout, that isn't a problem here if we've been "taking at least 'some' profits" as all of the pattern targets have gotten MADE, and there have been a bunch of them!

The first indication of any problem with this breakout would be "Ye Olde Knuckle-Biter," which would be a CLOSE back below the 2011 Falling Wedge, the top of which comes in today, July 20, at 50.704. The downward slope of that trendline is -0.04325 (a little over four cents), so subtract that amount each session to locate the trendline.

Technical analysis isn't rocket science, so we can't expect exactitude. After yesterday's Gap Up technical breakout, for example, FCX pulled back to see if "former resistance would act as support," as it should. The 55.65 low was about ten cents below the trendline, then the stock rallied to a new high on the session. That was a a validation of support at the top of the pattern. Those waiting for more of a gap fill from Monday's 55.05 close to buy, or to buy to cover their short position, didn't get the chance.

The upside targets listed on this chart are IN PLAY as long as FCX remains above the top of the 2011 Falling Wedge on a CLOSING basis.

DNDN: Ye Olde Knuckle-Biter Update

Review from the July 11 close (chart above) in DNDN:

"Technical analysis doesn't TELL US what to do. It only gives us information, and in this case, the information is, "There is evidence that the upside breakout of this Symmetrical Triangle "could be" a Fakeout/Breakout. The upside targets are ON HOLD as long as the stock remains below the breakout. What would we like to do about that?"

That's a money management decision, and it's up to the individual to make that determination, but it's important to have a stop loss in mind, in case the stock goes south so that we don't become bagholders (I think that I dislike that term so much because I've been a bagholder too many times...LOL).

Some players will give it another day, then sell if it closes back below the breakout a second time. Others will use the 39.22 low of the June 30 candle as their stop loss. Others simply will throw it in on the first close back inside the pattern, for a small loss. If the stock breaks out again, it always can be bought back and turned into a gain, given that the upside targets that would be back IN PLAY.

Taking a loss never is fun, but consider it a part of doing business. There's no getting around it. We WILL have losses, but if we employ sound money management skills, our gains will exceed our losses. Be objective and view it as "the trade went wrong," not as "We are wrong." It's best to get the emotions out of there.

Yesterday's close of 39.20, two pennies below the June 30 low of 39.22, was downright evil because it makes it very difficult to defend being long an upside technical breakout when the stock has closed below the "good news" low.

The trade also is more than a "Ye Olde Knuckle-biter," with the stock closing well inside the Symmetrical Triangle pattern. Traders who threw it in on the first or second close back inside the pattern are glad that they did, I would suspect. Buying the breakout at 41.56, or higher, now is a paper loss of 5.7%, or more, at yesterday's 39.20 close, so it's become a difficult trade.

Just something to think about. Analyzing charts is one thing. Actually play them is something else altogether and not always easy, as evidenced by this example of DNDN."



UPDATE:

False breakouts and breakdowns can be ver-ry frustrating, as evidenced by what has occurred in DNDN since the July 7 close of 41.19, back below the breakout.

Trendline #2-#4 came in yesterday at 38.217. The close was three-tenths of a penny above it, at 38.22, on a Doji Star Hammer that possibly is bullish, so The Bulls who (1)sho didn't throw it in at the 41.19 close below the breakout, (2) who didn't throw it in on the 39.20 close below 39.22 support, and (3) who didn't sell on yesterday's significant break of Trendline #2-#4 support still have a chance here with "Ye Olde Knuckle-Biter" close smack on the trendline, but...UGH.

Notice how, after the "good news low" of 39.22 got broken on a CLOSING basis on July 11, it became resistance on rallies (the four red arrows). There were upside penetrations each session, intraday, but it was no good and the stock got sent down for the test of trendline #2-#4. The high of those four sessions was 39.52, so The Bulls need to hold here and go up and CLOSE above that, at a minimum.

SLW: H&S Botttom/Ascending Triangle Breakout

From the July 5 close (34.44) in SLW:

" As the chart stands, SLW is short-term bullish with an Ascending Triangle breakout target of 37.43 IN PLAY."

UPDATE:

The Ascending Triangle target of 37.43 got MADE on July 13.

After the July 7 close, we speculated about the following possibility, seen in the chart above:

"We know that 37.43 is IN PLAY from the Ascending Triangle breakout. We never know whether or not any target will get MADE, but if this one does, or if SLW rallies to anything near it, then pulls back, we've got the possibility of an Inverse H&S pattern that would be larger than the one last winter and a stronger base from which to launch a rally through the Kumo, the top of which currently is at 40.015.

Just a possibility, but it sure would look purdy ;)"

That possiblity played out quite nicely. Here's how the chart looks at this juncture:



SLW ended up stopping during the rally, putting in a neckline and a Right Shoulder, then breaking out above the 37.20-37.14 neckline. The Right Shoulder is very skimpy. Some analysts would view the Inverse H&S pattern as an Ascending Triangle, with the little Ascending Triangle (The Head in this chart) nested within it, which is perfectly fine. Either way, SLW broke out above the 37.20-37.14 trendline on a Breakaway Gap higher.

Notice that the July 5 breakout of the Ascending Triangle also was a Breakaway Gap. When it's a pattern breakout, as that one was, those Breakaway Gaps tend NOT to get filled, prior to the target getting MADE, and sometimes they don't get filled for quite awhile, like the three gaps higher that we've discussed in FCX, nearly one year ago.

Strategy-wise, "it's a good idea to take at least 'some' profits when targets get MADE." The breakout was above 33.64, so taking profits when the 37.43 target got MADE is a nice 11.3% gain from the breakout. That locks in a winning trade with the "logical stop" now raised to below the low of the Right Shoulder, which was the July 11 low of 34.54. Selling there would be another small gain if the stop is taken out. Some players will throw it in if SLW goes back below the 37.20-37.14 breakout on a CLOSING basis. That's "Ye Olde Knuckle-Biter" for The Bulls because it brings into question how bullish the breakout was, especially since it was a Breakaway Gap. That decision is up to the individual trader.

The Breakaway Gap "could" get filled and the 37.20-37.14 "could" get successfully retested and the chart still would be bullish (IF the test is successful), but it's much more bullish if the gap is left open. That's the purpose of a Breakaway Gap. No one "should" be allowed to have the stock at prices below 37.20, which was the case after the Ascending Triangle Breakway Gap. If anyone wanted the stock after it gapped up from 32.47 on July 5, following the trendline validation at 31.78 on July 1, they had to "pay up" to get it, which is as it should be. That's part of what made the Ascending Triangle breakout so bullish. Everyone was locked out of those July 1 "island prices" when the stock gapped up on July 5 for a Bullish Island Reversal AND an Ascending Triangle breakout. Quite nice ;)