I wanted to revisit FCX today as a follow-up to a post I did in late July discussing a potential trade in the stock as it was trying to hold its $38 breakout level. At the time, this was my conclusion:
At the moment, I want to see FCX regain the $38 breakout level. If FCX can get back above $38 in the next week in a sign of technical strength, I am considering two possible bullish trades:
Hypothetical Trade #1: FCX Buy the Nov 39 / 44 Call Spread for 1.00
…
Hypothetical Trade #2: FCX Trade the Nov 35 / 40 Risk Reversal for a $0.05 credit
I never pulled the trigger on either trade because FCX never convincingly regained the crucial $38 breakout level. In fact, the stock has been in a steep downtrend ever since that July failed breakout:
The break of $35 this week was much easier than I would have expected given what looked like impulsive, aggressive buying on the late June / early July push higher. In retrospect, that was buying exhaustion rather than the start of new buyers coming into the name.
FCX is now firmly in the middle of its 1 year range, with the 200 day moving average flattened out. The metals complex as a whole looks seriously damaged in the past month, and we think it will take some time to heal in the best case, and continue trending lower in the worst case scenario. Our CAT trade from earlier this week was partly based on this theme.