Better Than Tech? Why FCX Stock Got Another Swing Trading Shot

It’s easy to get so focused on growth and technology stocks that you might miss strong moves elsewhere. It might seem boring by comparison, but Freeport-McMoRan and other metal ore miners posted some of the best gains of the past six months. As a result, FCX stock was worth another swing trading shot right before earnings.


Mining For Strength Outside Of Tech

Freeport-McMoRan (FCX) is no stranger to IBD’s SwingTrader service. FCX stock was one of the first trade ideas published at SwingTrader’s launch. It also provided one of our most profitable trades to start this year.

When thinking about the market leaders from the Nov. 4 follow-through day, do the metal and mining stocks jump to mind first? Interestingly, the SPDR S&P Metals & Mining ETF (XME) was tough to beat during that time frame. A gain of over 60% in that area was far better than the bulk of technology.

Which is why FCX stock joined SwingTrader again on April 14 with a strong gap-up at the open (1). The previous pullback was mild and got support near the 50-day moving average. In fact, the day before our entry, you could see the 5-, 10-, 21- and 50-day lines were all basically stacked right on top of each other.

FCX Stock Starts Strong Then Gets Stronger

After the gap, FCX stock continued to move strongly through the rest of the session. Enough to where we took our first third of profit the same day after a getting more than a 3% gain (2). That might seem quick to take profit but two factors went into the decision.

First, the market environment got tougher. Strength in the indexes masked rotation underneath the surface in the sectors. That can make progress slow down considerably. Especially in swing trading.

Second, we had a deadline on our FCX stock position. We had earnings due in just over a week and as a rule for SwingTrader, we don’t hold stocks through earnings. With enough cushion that can be OK for position trades but the extra risk doesn’t add up for swing trading.

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The looming earnings report was a reason that we also chose to take profit on the second third of our position the next day (3). At that point, we already had more than 7% profit from our entry.

Short Term Topping Signal And Market Weakness Lead To Exit

The gains continued to stretch and we were looking at perhaps a 10% profit in under a week. After getting right around that level on April 19, FCX stock reversed and closed lower for the day (4). An outside day, where the highs and lows engulf the previous day, is important for short-term trends. Specifically, where the stock closes for the day suggests where it may be heading.

That directional change came to pass the next day and we exited our final third (5). While the cushion offered us the flexibility to see if we could get support at the 10-day line, the earnings report took that flexibility away.

FCX stock offered temptation with support at its 50-day moving average the next day (6). But with earnings the following day (7), there wasn’t much that could be done there. Despite the rebound it still ended lower than our exit. Even though earnings met expectations, production target cuts weighed down the stock’s trading.

But it should stay on your radar since FCX stock could offer another chance. Just as it has for us a number of times.

More details on past trades are accessible to subscribers and trialists to SwingTrader. Free trials are available. Follow Nielsen on Twitter at @IBD_JNielsen.


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