Back in late January FCX sold off from 90 in a hurry. I started to look for an oversold bounce around 72. That didn’t work so well as it traded down another six points. I remember Gman and Joe P looking for a bounce in X a bunch of times because it had sold off from 65 to 53 and then to 47 at the same time. X eventually bottomed around 43.

The above examples illustrate a lesson that I learned a long time ago: stocks will go down much more quickly than they will go up. As stocks trade higher there are always people looking to lighten up on their positions and others willing to get short. This creates the slow but steady uptrending phenomenon we have watched for the past year in the market. But when stocks start to pick up some momentum to the downside almost everyone will step out of the way and in a few days an entire month’s uptrend can be erased.

Fast forward to today and I was looking at CLF as a potential bounce candidate. Silly me! Last Thursday I had it as a short below 71. Yesterday my short trigger was below 61.80. This morning I saw it at 56 and decided enough is enough already. It was down 20% in three days and I figured there would have to be some type of bounce. Oh contraire! Apparently my memory doesn’t extend back to three short months ago when the exact same pattern took place in all of the commodity names.

But upon reflection I remember exactly how I did make money when FCX eventually turned around. After losing on two separate occasions looking for the oversold bounce I vowed not to trade it again until it reversed on very heavy volume. On February 5th that is exactly what happened. A huge buy program came into the commodities during the afternoon. It was the beginning of an uptrend that lasted for two months. I got involved in that first day after FCX was 2.5 points from the bottom and I had identified the massive buy program.

I then traded FCX with a long bias for the next two weeks until it reached the next major resistance area around 78. This will be my approach this time as well. I will wait to see the huge volume come in and watch for the confirming up move. Coincidentally, FCX was within striking distance today of 69.10 which was the major support level on February 5th when the buy program was turned on. I will watch it in the coming days to see if it can hold that level and trade above 72 on volume.

I will also keep an eye on CLF and see if it can trade above 58 with volume. Until then there is just way to much agita to be involved.