Thursday, May 14, 2009

newsletter excerpt regarding FCX

The following is a short excerpt from this morning's Trend & Value Letter. frankly, I am posting this to the blog because it rehashes what looks to be a good call I made recently. so the idea is to impress you so you sign up for the service with the payment button at the top of the blog. the newsletter is mailed to subscribers every business morning and covers a variety of markets. the size of each issue ranges between 1000 and 2000 words, and usually includes a few (sometimes several) price charts.

[begin excerpt]

If your intention has been to short Stocks to profit from the next bear phase, I do hope that you took advantage of the irrational strength in so many issues these past weeks. I have highlighted some opportunities in these pages, and at the moment all my suggestions should be showing a profit if acted upon. This is the advantage of taking action in a timely manner, because now that it suddenly cool again to be a bear, a lot of traders will be trying to chase stocks lower. They might get lucky, the market may just collapse without an intervening bounce. But just as likely the market will respond with a major whipsaw. I think that most of the symbols that I have suggested shorting have seen their tops, but there is a distinct possibility that a retest, or near retest, of those highs is in the cards. I don't Know that for sure, but given that possibility, I am glad that most of my short selling suggestions were issued when each security was trading very near its high.

Take Freeport McMoran (FCX) for example. Last Wednesday morning I wrote the following note:

Well here we are and FCX is right at 50. Is this the time to short? Could be, or at least pretty close. The price is rising into what should be a stiff resistance zone amid a declining trend in volume. At 50 the share price is right in the middle of its trading range in 2006. 50 may have been a legit price when copper was trading above $3, but it seems a little rich these days.

In this market you just never Know, but I think the chance are strong that FCX is looking to top in the near future. 51.21 is the .3247 retrace target, considering that Copper itself hit a wall at its .3247 target last month, this ratio could very well impede FCX from further advance. I look for FCX to decline to at least 35 or perhaps 30.

FCX opened later that morning at 51.82 and quickly raced up to a high of 52.99. The low of the day was 51.23, the close 51.85. Pretty classic gap-up-climax-doji-whatever top.

Now unless you are strictly a short-term trader, I don't see any reason to cover at 46, 45 or even 40. But is it safe to initiate a short position here in the mid-40s? I am not so sure. It depends really on how much upside you are willing to risk. I do not have a particularly pellucid read on the situation, but I don''t really see why FCX couldn't get a brief bounce back above 50. If that were to happen then I would probably view it as another shorting opportunity. So if you want to short this one, but haven't yet, your options are to short at 46 (or where ever) and risk the trade going against you 10 percent or even more, or you can 'hope' the price does retrace back up there so you can sell at what should be a lower risk opportunity. Neither of the options are nearly as attractive as having sold above 50 to begin with.

In any event, my 35 to 30 downside target for FCX remains, but the timing and trajectory are fairly murky.

[end excerpt]

. . .so, that is the kind of stuff you get when you pay me money, though I should point out that I do not make explicit trading suggestions that often. I mostly analyze the major markets and leave it up to you to determine if/how you use the forecasting guidance provided.