I was involved in quite a few stocks this morning. Alerts were popping up left and right as the market was selling off. Part of my job as a trader is to quickly decide if an alert is important enough for me to stop watching my primary trading stock. At 9:51AM I received an alert that FCX had touched 82.54. I punched it up but couldn’t determine why I had set an alert for that price (not good-I always remind new traders to be aware of the reason they set a particular alert). So I re focused my attention on CVS which had just pulled back after an explosive up move.
CVS looked great on the daily chart as a long set up and the explosive up move right on the Open caught my attention. A bread and butter play on our desk is getting long stocks that have strong opening drives once they have had a chance to pull back and consolidate. But this is not the stock I am interested in discussing right now. Back to FCX.
On Friday November 13 FCX had gapped up almost two points from its Thursday closing price. As it is currently one of the strongest stocks in the market I was interested in getting long if it pulled back right on the Open due to some profit taking. I did not think it had much of a chance of going negative for the day so I was looking for another level where there might be some interested buyer to support the stock. I used the previous day’s high of 82.54 as a price that I would be interested in getting long if it pulled back. I liked this price for three reasons:
1) It was Thursday afternoon’s high so I knew that it would most likely serve as support
2) It was 50% below Friday’s Open and Thursday’s close so is a perfect retracement amount for all the technical trader types out there
3) It was very close to a support area from Wednesday November 11th
FCX never pulled back to 82.54 on Friday. It ended up being a gap and go play as it drove to 85. But with this morning’s weakness in the market FCX caught some downside momentum and touched 82.50. The first time it hit that level it bounced less than one point. As a trader it is my job to review all of the stocks I am following at 11:00AM to see how they traded on the Open. I failed to do that for FCX. If I had I would have seen that it had bounced right off of a significant price level and would have set an alert for that level in case it touched it again.
Armed with a price alert I would have caught the second up move which was about 1.5 points. That is a very easy setup that even the least experienced trader on our desk could have crushed it. Most stocks don’t touch a level exactly then have a complete reversal. Usually there is some HFT shenanigans that gets everyone’s stops to be triggered then the up move begins. But FCX is so strong that the buyers don’t have the time or compunction to let their buy prices be violated. They are just gonna buy at key support levels until the stock moves up to a higher range.
