One week ago activist investor Carl Icahn disclosed that a group he belongs to owns nearly an 8.5% stake in Freeport-McMoran (FCX). Rumors suggest Icahn may seek representation on FCX's board of directors and is calling for changes in some of the Company's business practices. FCX saw a pop in its stock price last week, but has since retreated well below its key 20 week EMA. Has Icahn timed this correctly? Well, it's much too early to tell and the chart below shows the direction of FCX is tied in large part to the direction of copper prices ($COPPER), which is LOWER. One intriguing aspect here is that copper prices have fallen approximately 20% since late April while the FCX stock price has cratered, dropping an eye-popping 60% over the same time frame. Obviously, Icahn is searching for value here and he may eventually find it. But technically, there's much work to be done here. A bounce in FCX, though, could take the shares back to the prior lows near 16.50 or so. That would be a 60% return from its current price. A simple test of the falling 20 week EMA would represent a 50% return. This should be viewed as a VERY aggressive trade, if you decide to consider it. Check it out visually:
Happy trading!
Tom
