Copper names such as Freeport-McMoRan Copper & Gold Inc. (FCX) and Southern Copper Corp. (SCCO) broke their intermediate uptrend lines at the beginning of January.
Their comparative relative strength versus SPY is not healthy and may be indicating lower prices to come. In addition, potential bearish head and shoulder reversal patterns may be forming, on their daily and weekly charts, which will trigger with confirmed moves through the necklines.
Both FCX and SCCO have many similarities in their charts. Outlined below is a trade idea for SCCO, which can also be applied to FCX.
Chart 1: Illustrates the comparative relative strength of SCCO versus SPY and a potential warning signal for further downside prices in SCCO.
Chart 2: The daily chart below displays a potential bearish Head and Shoulders reversal pattern, which will trigger with a confirmed break of the neckline (currently around $43.30). An aggressive entry is not indicated because shorts have not been very successful in the current tape, therefore, wait for a confirmed signal. Trigger: confirmed break of the neckline (currently $43.30) Target: $35, Protective Stop: Confirmed move back above the neckline. Trail Stop: confirmed move above the current downtrend line, which can be drawn by connecting the highs of the head to the highs of the right shoulder and extending.
Chart 3: Daily chart of FCX, which is very similar to SCCO.
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Disclaimer: The information contained herein is not guaranteed. This is not a solicitation of any order to buy or sell. This material is based upon information that I consider to be reliable, but I do not guarantee its completeness or accuracy. Assumptions, opinions and recommendations contained herein are subject to change without notice, and I am not obligated to update the information contained herein. I have a position in SCCO, FCX and SPY . This communication, including any attachments, is for the exclusive use of the intended recipient(s) and/or the intended recipient’s designees. Any use, retention or dissemination by a person other than the intended recipient is strictly prohibited. If you are not the intended recipient or designee, please notify the sender immediately by return e-mail and delete/destroy all copies of this communication.