NEW DIRECTIONAL PUT PLAYS
Freeport-McMoRan - FCX - close 81.44 change -0.33 stop 84.55
Freeport-McMoRan Copper & Gold Inc. (FCX), through its wholly owned subsidiary, Phelps Dodge Corporation (Phelps Dodge) is a copper, gold and molybdenum mining company. Its portfolio of assets includes the Grasberg minerals district in Indonesia, which contains the single recoverable copper reserve and the single gold reserve; mining operations in North and South America, and the Tenke Fungurume minerals district in the Democratic Republic of Congo (DRC). FCX also operates Atlantic Copper, its wholly owned copper smelting and refining unit in Spain.
Target(s): 78.00, 76.80, 75.75
Key Support/Resistance Areas: 84.25, 76.50, 75.00
Time Frame: 1 week
Why We Like It:
FCX has gained nearly +20% since its low on 8/25 less than 3 weeks ago. The stock has surged higher, virtually in a straight line with little to no pause. FCX has rallied right into its primary downtrend line from its January highs and also closed at a prior resistance level from mid-March. This type of move is not sustainable and I suggest readers open short positions at current levels and play for a retracement of the stock's recent gains. Our primary target is $76.80 which is about -5.5% lower than current levels, and also just above the 38.2% retracement from the 8/25 lows to today's highs. For options traders, if this target is reached it should produce a gain of approximately +60% to +65%. This could be a quick trade and a good strategy would be to immediately place a "good til cancelled" or "one cancels the other" order immediately after the position is entered and be ready to take profits or get out should our target/stop get hit.
Suggested Position: Buy October $75.00 PUT, current ask $1.60
Entry on September xx
Earnings: 10/20/2010 (unconfirmed)
Average Daily Volume: 10 million
Listed on September 14, 2010