With the general market indexes in downtrends, it's surprising to see so many stocks resisting the selling pressure. These are the stocks we've gravitated toward and FCX stock is a recent swing trading example that closed with a nice profit.
Swing Trading Example: FCX Stock
Freeport-McMoRan is one of those stocks that seems to regularly find its way on SwingTrader. Our success generally comes from reversal opportunities in FCX stock.
We are still getting most of our outperformance from staying on the sidelines while the market falls. However, we'll take a few probing positions just to have some exposure in case the market turns.
With FCX stock, it had a strong move starting in the latter part of 2020 and lasting about a year. It topped out at 46.10 and carved a long cup base that started in May 2021.
More recently, FCX stock got back to its previous high and tested it twice, once in January (1) and again in February (2). Then it pulled back in an orderly fashion and drifted below its short-term, 5- and 10-day moving average lines. After FCX stock undercut recent lows, it showed a strong reversal after finding support at its 50-day moving average line (3). The relative strength line was already at new highs ahead of the price, and trading volume confirmed the supporting price action. This is where we made our entry on SwingTrader.
The entry happened on a dramatic reversal in the market indexes. The Nasdaq composite dropped roughly 3.5% that day, undercutting its Jan. 24 reversal, then powered higher for a 3.3% gain at the close. Notably, FCX stock held well above its recent lows.
Holding The Short-Term Moving Averages
Freeport followed up on the strength the next day and we started taking profits (4). We took our first third profit after hitting a 3% gain shortly after the open. As the day progressed, FCX stock was up 7% from our entry and we took another third profit later in the same trading session.
Check out this webinar on how we use the relative strength line to find leading stocks.
With most of the position locked in as profits, we have the flexibility to let a stock run. The 5- and 10-day moving averages can provide a good line in the sand for protecting profits should the stock start rolling over. They can act almost like a trailing stop.
Downside reversals can provide another signal to exit a position. That was a concern on March 1, but even though FCX stock closed well off its highs that day, it was still up 2% at the close (5).
But it held its ground staying inside the wider range over the next two days and eventually getting support at its 5-day line (6).
Locking In Gains For The Trade
When FCX stock dropped below its 5-day moving average for the first time, we made our final exit (7). The stock had eight consecutive gains and that warranted a pause. But that didn't mean we had to hold it during its break.
But neither should it drop off the radar. As it got support at its 21-day exponential moving average on a bullish reversal (8), FCX stock looked poised for another potential opportunity.
More details on past trades are accessible to subscribers and trialists to SwingTrader. Free trials are available. Follow Nielsen on Twitter at @IBD_JNielsen.
