Sunday, September 20, 2015

VR Tutorial for Freeport McMorRan

From the desk of top market timer Mark Leibovit

Companies throughout the commodities industry have gotten hit hard in recent years, with Freeport-McMoRan (NYSE:FCX) suffering a double hit because of its concentrated exposure to the mining and energy industries. Recently, controversy has swirled around Freeport, as activist investor Carl Icahn disclosed a substantial stake last month even as the stock was falling to new multiyear lows. Yet even though Icahn's appearance and the potential for a sale or spinoff of the company's energy assets has helped lift shares from their recent low levels, many investors are forgetting the core challenges that Freeport-McMoRan faces if it wants to recover fully from its extensive losses since mid-2014. In addition, the company said Friday that it has raised $1 billion through a sale of its shares and disclosed plans to sell another $1 billion, as the beleaguered miner looks to raise cash amid weak commodity prices.

Much of the short-term movement has been news driven, that's for sure, but I am monitoring the stock primarily through the eyes of my Leibovit Volume Reversal indicator.  In the daily chart, four Leibovit Positive VRs were formed since August 27 and in the weekly chart, a weekly upside 'Key Reversal' and Leibovit Positive VR were formed - both confirmed by a rising 5/3/3 stochastic. As a result we traded FCX at on the long side. However, on Friday (directly tied to the aforementioned news announcement), the stock sold off and was accompanied by a Leibovit Negative VR, so we 'rang the register' on the long pay cashing in on nearly a 30% profit.  Though the Leibovit Negative VR and a declining 5/3/3/ stochastic confirm that a short sale is supported here, I am inclined not to take a short trade in a stock that is down from $61.00 a share to $7.76 over the past four years and would rather wait for another buying opportunity.

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