The bull train is surging full steam ahead on Wall Street with the S&P 500 Index reaching five-year highs while the Dow Jones Industrial Average continues its ascent into uncharted territory. Investors have had few reasons to take profits over the past week with Cyprus debt drama slowly fading away while economic data releases continue to support a bullish case; this week alone construction spending and factory orders data figures have trumped expectations, while key employment data is on tap for this Friday [for more market news and analysis subscribe to our free newsletter].
The rising tide on Wall Street has lifted most, but not all, boats in the sea of equities; mining bellwether Freeport-McMoRan (FCX) presents an intriguing opportunity at the moment that warrants a closer look from contrarian investors looking to get a piece of the action in the stock market.
Chart Analysis
FCX has been very uncorrelated to the broad market since peaking at $43.65 a share in mid-September of last year; since then, shares of the mining giant have tumbled below their 200-day moving average (yellow line) as the company’s decision to expand into the energy sector in December of 2012 put a serious strain on future earnings growth prospects. Nonetheless, investors remain confident that this bellwether can resume its uptrend, judging by the massive buying volumes seen on 12/5 and 12/6/2012, after which the stock managed to keep its ahead above $31 a share – the same level that it rebounded off in late July of 2012.
Click to Enlarge
This stock appears to be building out support around $32 a share, which is a key level that it has previously rebounded off. As such, risk-tolerant investors may wish to take a long position at current levels since they have an opportunity to favorably position themselves in anticipation of a trend reversal while closely managing downside risk by placing a stop-loss right around the recent low of $30.54 a share [see 5 Commodity Trading Mistakes You Could Be Making].
Outlook
FCX’s pullback over the last few months offers an attractive buying opportunity for long-term investors; however, it’s important to recognize that calling the bottom here is a risky play seeing as how this stock is still in a downtrend (blue line) and trading below its 200-day moving average. As always, investors of all experience levels are advised to use stop-loss orders and practice disciplined profit-taking techniques.
Don’t forget to subscribe to our free daily commodity investing newsletter and follow us on Twitter @CommodityHQ.
Disclosure: No positions at time of writing.
[...] Commodities:FCX, CVX, GLD, SLW, FMC, AA, APC [...]