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Freeport-McMoRan Inc. (FCX) hit a 6-month low and turned higher in September after the Copper futures contract carved a potential double bottom at the 50-week moving average. Two upgrades have followed that turnaround, raising odds the copper-levered blue chip miner has finally ended a healthy correction and will now test May’s 9-year high in the mid-40s. However, patience is advised because accumulation is slumping near a 52-week low, highlighting persistent skepticism.
Inflation Fears and Supply Constraints
Many commodities are pushing against multiyear highs in reaction to growing inflation fears and/or supply constraints. Long- and short-dated Treasuries got a summer reprieve after yields at both ends hit the highest highs in more than a year but those bounces have now failed, giving way to downticks that could lift interest rates into territory not seen since 2018. In turn, copper could break out above May’s all-time high at 4.888, allowing Freeport-McMoRan to test 2011 price levels.
Bank of America Securities analyst Lawson Winder reinstated Freeport-McMoRan as a ‘Buy’ just two weeks ago, noting “FCX is a US listed, large, liquid, well-run copper mining company with a geographically diverse asset base (US, Latin America, Indonesia) and a strong track record of rewarding shareholders. FCX is now through a risky period and we see intriguing growth optionality and returns going forward. We are neutral copper in the short-medium term but see strong long-term fundamentals.
Wall Street and Technical Outlook
Wall Street consensus has grown more bullish in the last three months, now standing at an ‘Overweight’ rating based upon 14 ‘Buy’, 1 ‘Overweight’, 2 ‘Hold’, and 2 ‘Sell’ recommendations. Price targets currently range from a low of $29 to a Street-high $54 while the stock is set to open Tuesday’s session about $9 below the median $44 target. A rally into the midpoint looks like a smart bet at this point but, as usual, Freeport action will depend on the futures market.
Freeport-McMoRan posted an historic uptrend between 2000 and 2008, underpinned by rapid industrialization in the BRIC nations. It completed a double top breakdown in 2015 and fell within 14 cents of the 2000 low in 2016. A higher March 2020 low set off a vertical rally impulse that reversed after crossing the .618 Fibonacci selloff retracement level in May 2021. A follow-through rally in coming months could easily reach the .786 retracement in the low 50s.
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Disclosure: the author held no positions in aforementioned securities at the time of publication.
This article was originally posted on FX Empire