Beware of $FCX Bear Trap

Since January 3rd, 2011, Freeport-McMoRan Copper & Gold Inc (FCX) has declined by almost 50% from its high of 61.25. Though the Chart of FCX might lead one to believe that FCX is getting ready to breakout of its multi-year descending triangle to the DOWNSIDE, I’d like to take the contrarian approach, the opposite side of this BEARISH argument, and make a BULLISH case for FCX. For all those who haven’t heard of FCX, FCX is a Gold Miner.

My BULLISH case for FCX is as follows:

1. The pattern is way too mature to even be considered as a legitimate Descending Triangle pattern. The BEARISH momentum on FCX has hit a road-block/a dead-end.

FCX - Downward Breakout
Weekly Chart of FCX

 

2. SPDR Gold ETF (GLD) which has a positive correlation of 0.8 to FCX, is getting ready to breakout of its multi-year pennant, to the UPSIDE.

GLD - Weekly Chart
GLD – Weekly Chart

I think the most likely path that FCX will take is similar to the one I’ve laid out for GLD in the above screenshot.

FCX - Weekly Chart
FCX – Weekly Chart

Plus rising inflation around the world will cause Gold prices to rise as well, due to increased demand for a safer currency.

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