One of Our Favorite “Trophy” Stocks is Set to Break Out
One more potential “breakout” for the contrarian traders out there…
In yesterday’s edition, we noted how beaten-down transportation stocks staged an important multi-month price breakout this week (along with small banks, defense, and homebuilder stocks). We’re attracted to this “beaten down, but showing a bit of price strength” setup because it gets us into cheap, out-of-favor assets. The preceding selloff “wrings out” most of the downside risk… and leaves us with lots of potential upside.
#-ad_banner-#Another beaten-down sector showing signs of life is the “trophies” of the natural resource complex… companies like Freeport-McMoRan (FCX). We call Freeport a “trophy” because it’s the world’s largest public copper company. It controls the giant Grasberg mine, which is the world’s largest gold mine and third-largest copper mine. It is one of the “jewels” of the resource industry.
Like most assets, Freeport was hammered during the second half of 2011. Shares fell from their summer high of $55 to a low of $30 (a 45% drop). But as you can see from the chart below, this “trophy” stock has bottomed… has strung together a bullish series of “higher highs and higher lows”… and has just cleared its December high. Should the global markets continue to get “less bad,” it’s a chip shot back to its summer level of $50.