Freeport-McMoRan Rises 4.77% on Bullish Technicals Amid Overbought Signals

Freeport-McMoRan (FCX) has surged 3.74% in the most recent session, extending a two-day rally with a cumulative gain of 4.77%. This upward momentum suggests short-term bullish bias, though the broader context requires deeper analysis to assess sustainability and potential reversal points.

Candlestick Theory

Recent price action shows a two-bar bullish pattern, with higher highs and higher lows forming a potential continuation of an uptrend. Key support levels can be identified at prior troughs, such as the $40.03 level (August 5) and $38.48 (July 25), while resistance appears at $43.28 (August 22) and $44.89 (July 25). A breakdown below $40.03 may trigger a test of the $37.86 (April 30) support, while a breakout above $43.28 could target $45.80 (July 22).

Moving Average Theory

The 50-day moving average (currently around $42.00) remains above the 200-day average ($40.50), indicating a bullish intermediate-term trend. However, the 100-day MA ($41.80) is converging with the 50-day MA, suggesting potential for a crossover that could signal a slowing momentum. Price above all three MAs reinforces the uptrend, but a close below the 50-day MA would warrant caution about trend exhaustion.

MACD & KDJ Indicators

The MACD histogram has shown positive divergence in recent sessions, with bars expanding as price rises, reinforcing bullish momentum. The KDJ stochastic oscillator indicates overbought conditions (K=85, D=78), suggesting a potential pullback risk. However, the RSI (discussed below) remains within neutral territory, creating a divergence that may delay immediate reversals.

Bollinger Bands

Volatility has expanded recently, with price trading near the upper band of the Bollinger Bands ($43.28 vs. upper band of $44.00). This overbought position aligns with the MACD and KDJ signals, increasing the likelihood of a reversion toward the 20-day MA ($42.50). A break below the middle band ($42.00) would signal a shift in volatility dynamics.

Volume-Price Relationship

Trading volume has surged in the last two sessions, with the most recent session’s volume (10.8 million shares) exceeding the 30-day average by 20%. This confirms the validity of the upward move, though a sharp decline in volume on a pullback could indicate weakening conviction in the trend.

Relative Strength Index (RSI)

The 14-period RSI stands at 58, indicating neither overbought nor oversold conditions. While this suggests the rally has room to extend, a rise above 60 would trigger caution about short-term overextension. Conversely, a drop below 40 may signal a consolidation phase.

Fibonacci Retracement

Key Fibonacci levels derived from the recent $38.48 to $44.89 move include 61.8% at $42.00 and 78.6% at $43.50. Price proximity to the 61.8% level aligns with the 50-day MA, suggesting a potential consolidation zone. A break above $43.50 could target the $44.89 high, while a failure to hold $42.00 may lead to a test of $40.03.

Backtest Hypothesis

A backtested strategy using RSI-based signals (buying below 30, selling above 60) underperformed the market from 2022 to present, achieving 15.47% vs. the benchmark’s 43.99%. This underperformance may stem from FCX’s tendency to remain in overbought territory during strong trends, reducing the frequency of actionable oversold entries. The strategy’s Sharpe ratio of 0.16 and lack of drawdowns suggest low volatility but poor risk-adjusted returns, highlighting the need for complementary indicators like moving averages or volume analysis to refine entry/exit points.