Freeport-McMoRan (FCX) at Resistance Ahead of Earnings

Freeport-McMoRan Inc. (FCX) woke up from the dead in 2020, entering the first uptrend since the first quarter of 2018 and doubling in price by the end of the year. The stock has continued its gains so far in January, adding another 15% while hitting its highest level since 2014. The rise followed a historic move in copper. forward markethelped by the company’s exposure to gold and fossil fuels.

Key points to remember

  • Freeport-McMoRan stock doubled in price in 2020.
  • The company reports its fourth quarter 2020 results during Tuesday’s premarket.
  • The rally has now reached highs resistance in the low $30s.

The mining giant reports fourth quarter 2020 results in Tuesday’s premarket session, with analysts looking for earnings of $0.40 per share on $4.33 billion in revenue. If met, earnings per share (EPS) would mark an impressive twenty-fold increase in earnings from the same quarter in 2020. The stock rose 3.5% in October after beating estimates for third-quarter revenue and profit, and it has climbed another 66% since then. .

Freeport has partially recovered from a long commodity decline that ended in 2020, fueled by government stimulus measures that could signal the start of a decades-long wave of inflation. The miner was saddled with high debt after buying into the oil and gas sector at the worst possible time in a decade, but cost containment and the crash of bond yields enabled the company to pay off a ton of debt and strengthen the balance sheet.

Wall Street sentiment has improved steadily in 2020, with consensus moving to an “Overweight” rating based on 14 “Buy” and 6 “Hold” recommendations. More importantly, no analyst is recommending shareholders to close positions and move to the sidelines, despite the 100% return. Price targets currently range from a low of $17 to a high of $38, while the stock will open Monday’s session around $1.50 below the midpoint target of $31. Further upside is possible after this week’s earnings report, given this mid-range placement.

Point

A balance sheet is a financial statement that shows a company’s assets, liabilities and equity at a specific time, providing a basis for calculating rates of return and valuing its capital structure. It is a financial statement that gives an overview of what a company owns and owes, as well as the amount invested by shareholders.

Freeport–McMoRan monthly chart (2000–2021)

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The stock hit an all-time low of $3.38 in 2000 and entered a powerful uptrend, fueled by industrial development in the BRIC nations. The rally posted an all-time high at $63.62 in 2008, giving way to a vertical decline that ended in single digits in December. Aggressive buyers returned in the new decade, lifting the stock on the same trajectory as the previous decline before it stalled just two points below the previous high in 2011.

The decline that followed completed a huge descending triangle breakdown in 2014, signaling a downtrend that undermined the 2008 low before stalling 14 cents above the 2000 low in 2016. The bulls took control in early 2018, digging a slight rise that ended at 50 months exponential moving average (EMA) resistance. It successfully tested the trough in March 2020 and moved higher again, completing a multi-year stretch double bottom reversal when it hit the 2018 high in November.

The rally has now moved past the descending triangle resistance at the 50% sell retracement level between $28 and $33. Theoretically, at least, this major barrier will be difficult to breach in the coming weeks, favoring a downturn that shakes off the excess bullishness. A pullback to the red line in the lower $20 should provide a low-risk buying opportunity in this scenario ahead of even stronger price action in the years ahead.

Point

BRIC is an acronym for the developing countries of Brazil, Russia, India and China, countries considered to be the future dominant suppliers of manufactured goods, services and raw materials by 2050. China and l India will become the world’s leading suppliers of manufactured goods. goods and services, respectively, while Brazil and Russia will become equally dominant as raw material suppliers.

The essential

Freeport stock completed a double-bottom breakout and hit major resistance in the $30s ahead of this week’s earnings report.

Disclosure: The author held no position in the aforementioned titles at the time of publication.

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