One of the most important attributes of a trader is the ability to quickly change your bias in a stock.  This mental skill is paramount for an intraday trader.  In today’s market, a stock is likely to reverse its trend multiple times each day.  A stock that is very strong one day will be very weak the next.  It is essential to recognize these changes quickly.

Our desk has been actively trading FCX for the past week. FCX caught our attention when it canceled a previously announced dividend.  That is very bad news.  That is the type of news that can really kill a stock but at a minimum will put the stock In Play.  The key level from that day was 17.  There was a lot of buying at 17 and just above this level.  FCX rallied strongly into the close off of this level.

The following day FCX was discussed in our SMB AM Meeting as a Second Day Play and as a stock that had potentially bottomed.  You can see from the long term chart that in only a few months FCX has dropped from above 80 to under 20.  Now that it was on our radar we were looking for evidence of a possible bottom or whether it would continue lower.  One of the simplest ways to identify a longer term change in direction of a stock is to observe how it reacts to news.  In the case of FCX after the dividend suspension the stock gapped down several points.  But it didn’t close near its low and rallied that day into the close.

We were looking to buy strength in FCX above 18.25 or into a pullback close to the prior day’s support at 17.  If FCX traded forcefully below 17 then we would change our bias to the short side.  I was able to make money trading FCX from the long side that day by following the above strategy.

The next day FCX dropped the 17 bid and my bias was short.  FCX traded down to 16 and at one point seemed that it might trade significantly lower.  But as the market rallied in the afternoon FCX crept higher.  I still had a short bias because it was below 17 and its Up Moves weren’t as impressive as the market’s afternoon rally.  I actually held a small short position over the weekend.

On Monday morning FCX was up $1.50 during premarket trading and showing signs of strength above 18.50.  At that point I covered my short as my bias had changed to trading FCX from the long side again.  A key level after the market opened for me was 18.80 a level that FCX struggled to stay above the previous Thursday.  After the market opened FCX popped to 19.40.  This was further confirmation to me of my long bias.  At that point I was hoping for a pullback to 19 for a safer entry point.  And I actually held out hope for a move to 18.80 where I expected strong support.

FCX pulled back to 18.80 and I got long.  When it rallied above 19.40 I bought more.  I was able to catch a one point up move over the next few minutes. Chop!  I was traveling for the rest of the day so my sale at 20.45 was my final trade for the day.  It is clear from yesterday’s and today’s price action that a close above 21 would be bullish for the stock.

I don’t really care whether 16 was the bottom in FCX.  My bias will always change based on its price action and trading volume.  I will make money trading FCX whether it continues higher to 25 or goes back down to 16 or lower.  That is why I love my job.