For today’s Trade of the Day, we will be looking at potential 471% move in Freeport McMoRan Inc. symbol (FCX).
Before analyzing FCX’s chart, let’s take a closer look at the stock and its services.
Freeport-McMoRan Inc. engages in the mining of mineral properties in North America, South America, and Indonesia. The company primarily explores for copper, gold, molybdenum, silver, and other metals, as well as oil and gas. Its assets include the Grasberg minerals district in Indonesia; Morenci, Bagdad, Safford, Sierrita, and Miami in Arizona; Tyrone and Chino in New Mexico; and Henderson and Climax in Colorado, North America, as well as Cerro Verde in Peru and El Abra in Chile. The company also operates a portfolio of oil and gas properties primarily located in offshore California and the Gulf of Mexico. As of December 31, 2021, it operated approximately 135 wells. The company was formerly known as Freeport-McMoRan Copper & Gold Inc. and changed its name to Freeport-McMoRan Inc. in July 2014. Freeport-McMoRan Inc. was incorporated in 1987 and is headquartered in Phoenix, Arizona.
The chart of FCX below is a weekly chart with a CCI indicator at the bottom. The description coming up next explains how to use the CCI.
Channel Commodity Index
Stockcharts.com provides a great definition of the Commodity Channel Index (CCI), which is a versatile indicator that can be used to identify a new trend or warn of extreme conditions. Originally, it was developed to identify cyclical turns in commodities, but the indicator can be successfully applied to indices, ETFs, stocks and other securities. In general, CCI measures the current price level relative to an average price level over a given period.
CCI is relatively high when prices are far above their average but is relatively low when prices are far below their average. In this manner, CCI can be used to identify overbought and oversold levels or breaks from one level to another.
A move down to the CCI -100 or the zero line can issue a Put entry signal as it moves from being bullish to bearish. A move toward -100 is a continuation of that bearishness. Up through the 100 line creates a green fin of bullishness until it drops back down through the -100 line.
A break below the zero line means it has gone from bullish to bearish and a drop below -100 suggests even more bearishness.
On the CCI indicator below the FCX chart, notice how the line is has almost crossed the zero-line going into bullish territory. This signals bullish moves with the thought that price may move up.
FCX’s Potential Trade
Please note and remember that I am typing this on Monday, two days before you receive it. The information I am sharing could change over those two days and is intended to share the opportunities that options offer us.
Freeport McMoRan (FCX) has been heading up for weeks. We want the CCI to rise to create an upper fin shape. We also want the price to go to at least $43 before entering a trade. The first target would be $50.
Check Out How an Option Trade Could Pay Out Big Time
To buy stock shares of FCX today, price would be approximately $42. If you bought 10 shares that would be $420. If price rose to $50 you would make $80 on your $420 investment.
This said, option trading offers the potential of a smaller initial investment and higher percentage gain even when price is expected to rise or fall. Let’s take a look.
If you bought one call option contract covering 100 shares of FCX’s stock with a July 15th expiration date for the $48 strike, premium would be approximately $.85 today, or a total of $85 per contract. If price rose the expected $8, the premium might increase approximately $4.00 to $4.85 per share on your 100-share contract. This is a 471% gain over a couple weeks.
For updates on previous potential trades we have discussed, scroll to the bottom of this message.
Remember you can close an option trade anywhere along the line before expiration to take gains or stop a loss.
Options can offer a win, win, win trade opportunity. They often offer a smaller overall investment, covering more shares of stock, and potentially offer greater profits.
I love to trade, and I love to teach. It is my thing.
I wish you the very best,
PS – I have created this daily letter to help you see the great potential you can realize by trading options. Being able to recognize these set ups are a key first step in generating wealth with options. Once you are in a trade, there is a huge range of tools that can be used to manage the many possibilities that can present themselves throughout the trade to earn and take profit or prevent a loss. Lots of fun things to learn and fine-tune.
Past potential trade update:
Last week we discussed buying GILD calls with a 67 strike. It did not reach the target entry price so no trade would have been taken.