For Freeport-McMoRan, a Much Bigger Advance Lies Ahead
I continue to favor the long side of copper.
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Shares of copper producer Freeport-McMoRan FCX were raised to a fundamental "outperform" (buy) rating at CICC with a $54.50 price target. This could be the beginning of a much bigger advance.
Goldman Sachs estimates that the industry needs to spend $150 billion over the next decade to address a projected annual supply shortfall of 8 million tons. The demand for the base metal copper amounted to a global total of 23.5 million metric tons in 2020.
Let's check some charts.
In this daily bar chart of FCX, below, I can see that prices broke out on the upside from a base pattern. Prices rallied into early April and have recently corrected to the downside allowing prices and traders to reposition themselves for further gains. FCX trades above the rising 50-day moving average line and above the rising 200-day moving average line.
The On-Balance-Volume (OBV) line has risen from a low in February and tells me that traders of FCX have shifted from being aggressive sellers to being aggressive buyers. The Moving Average Convergence Divergence (MACD) oscillator is above the zero line and narrowing towards a fresh buy signal.
In this weekly Japanese candlestick chart of FCX, below, I went back five years to gain some perspective. Prices have moved sideways in a wide trading range the past three years. Prices are now poised for a major upside breakout. FCX trades above the rising 40-week moving average line.
The weekly OBV line is rising. The weekly MACD oscillator is in a bullish alignment above the zero line.
In this daily Point and Figure chart of FCX, below, I can see an upside price target in the $57 area. A trade at $53 will refresh the uptrend.
In this weekly Point and Figure chart of FCX, below, I used a five box reversal filter. Here the software suggests a price target in the $112 could happen over the longer-term.
Bottom line strategy: I continue to favor the long side of copper, FCX and Southern Copper SCCO as I have outlined on April 19 and earlier. Raise stops on FCX to $45.
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