FCX possible Swing Trade

For now, I would set up my risk management and position sizing in FCX as a swing trade, if it works and trends, you can add to FCX and introduce a trending stop. For more information on shorting a stock (specifically regarding adding to the position as it works in your favor and why short selling allows you advantages that a long trade doesn't) see my article from Trade-Guild.net, "Making More Then 100% on a Short" . The article was written a while ago, but is still relevant and may also give you some ideas as to the advantages of a real equity short over an inverse/short ETF (which is considered a long position in your portfolio). I think there are advantages to each and disadvantages, it's a matter of using the right tool for the trade.

If I was considering FCX as an options trade, I would buy March Puts and slightly in the money. Otherwise, I would consider the trade for a real equity short sale. The options are going to limit your time and you'll have decay. However if a head fake confirms, then options will give you leverage as well as pre-defined risk.

I talked about FCX last night, you may want to take a look at that article as well. As far as Trends in FCX, without going in to Dow Theory and using my simpler model of moving averages which works out just about the same, FCX is in a primary downtrend, a slightly positive intermediate trend and short term trend is flat.

 This s a 2-day chart just to give you an idea of where FCX is, the primary downtrend is obvious, so trading with the trend is a plus here.

 The triangle that has set up is a symmetrical triangle and carries no bullish/bearish implications other then the preceding trend. Some may look at the preceding trend as up and this would be advantageous in a head fake situation, longer term it's hard not to call the preceding trend down.

 Step 1 of any good head fake trade (and these trades tend to be ripe/ready and move quickly) is an obvious price pattern that traders will be aware of, we have that, step 2 is a breakout. For the size of the triangle, volume on yesterday's breakout is lacking and there's no reason a bullish breakout should be lacking at the start of the new year. The follow through today is also lacking in volume, but overall from a price standpoint, it looks bullish.

 When you look at the breakout on an hourly chart, all of the sudden it doesn't look so bullish. Volume is dropping off significantly and recent price candles have lost momentum, not what you want to see on a follow through day after a breakout.

 Here we see accumulation for the breakout, it's not a long period, but t is in the right place, at the low end of the triangle and in a flat trading range. Note however that the 10-min chart which has had plenty of time to confirm the price move, has not.

 The 5 min chart could have and should have confirmed the breakout yesterday, instead it is actually in a leading negative position, this would suggest distribution. Confirmation would see 3C where the orange arrow is.

 A closer view (zoomed to show intraday movement) shows 3C moving lower in to higher prices, this is part of the reason Wall Street runs head fake/false breakouts, they have demand (bulls buying) to sell in to at higher prices rather then crash prices by trying to sell in to a market lacking a bid.

 The 2 min chart also shows accumulation in white to prep the breakout, again, note the accumulation near price lows and in a flat range (these are signs of institutional money at work-most traders look for volume spikes and such, but Wall Street does their buying and selling in boring, flat areas and usually on light volume, they don't want to attract attention while they are accumulating/distributing as that would drive prices against them).

The 1 min hart confirms everything seen above, it is in a leading negative position.

Furthermore, as I showed with the Credit/Risk basket, commodities are frothy compared to their FX correlations and the macro environment for many commodities is not good with China's manufacturing sector in decline.

If you like the trade, a phased entry could be used with a partial position here or you could just wait on confirmation of a head fake, if I used options, I would prefer confirmation of the head fake.