FREEMONT MCMORAN BREAKS KEY SUPPORT – AND THE BULLS' BACKS

Freeport McMoran

has sliced right through key Fibonacci “correction support” at $33.40 – which also represented the long-term uptrend line support. That break tells us all that lower prices are still ahead for FCX shares. How low will they fall and how do traders play the upcoming moves in the stock? What the bulls see in FCX… • A cheap resources stock with: o A price-to-sales at 1.62 o A price-to-book of 1.72 o An enterprise value greater than its market capitalization, and o A price-to-earnings ratio of just over 12 with earnings growth next year expected to be over 16 percent • A nice 3.4 percent dividend yield • A company that should benefit if and when inflation rears its head to the world What the bears are seeing… • A very bearish price chart that that is telling of more downside to come – down to $32.03 or $31.19 according to most technicians. • A company that carries a heavy amount of debt o Over $20 billion in debt versus only $1.6 billion in cash reserves o An overall debt-to-equity ratio of 76% The technical take… Technicians are seeing that Freeport McMoran is in the third wave lower in a five wave sequence. The downside targets they are putting forth are $32.03 and $31.19 – both Fibonacci price projections. From there, they are calling for a modest upside counter-trend rally that may take the price back up to the recent breakdown point at $33.40 - $33.50. The overall trend is now lower, though, and rallies are to be sold into – they note. The next wave lower – after whatever bounce occurs in the very short-term – could take the stock to $30 or slightly lower.