Can Freeport-McMoRan Make it to $20?

The copper play has broken out of a massive bullish pattern.
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The price of copper has skyrocketed since March, gaining nearly 50%. That's an impressive move for the metal known to many as Dr. Copper. The nickname refers to the correlation between copper and the global economy. If the price of copper is rising, it's considered a sign of a strengthening economy. 

Copper mining stocks have climbed along with the price of copper; in fact, the returns on some of these names outpaces the gains made by the red metal itself.

Consider mining giant Freeport-McMoRan (FCX), the world's largest publicly traded copper producer. Shares of Freeport-McMoRan have more than doubled since reaching a low of $5.31 on March 18th. 

Does this stock have the potential to move even higher? According to the stock's chart, Freeport-McMoRan could climb to $20 per share. 

Freeport McMoRan (FCX). Chart by TradeStation

Freeport McMoRan (FCX). Chart by TradeStation

Freeport-McMoRan has formed a large inverted head and shoulders pattern. If we measure the formation from its high to its low, the pattern has a height of approximately $8. Add $8 to the breakout point of $12.80, and the result is a target price of $20.80. 

The stock's 50 day moving average, in blue, crossed above its rising 200 day moving average, in red, to create a bullish pattern known as a golden cross (shaded light blue). 

Notice how the stock gave traders several chances to get long after the breakout (black arrows). In an earlier article, I explained how to trade these so-called "second chance" opportunities. 

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Ed Ponsi is the managing director of Barchetta Capital Management, and is the author of three books for publisher Wiley Finance. A dynamic public speaker, Ed has made appearances around the world, in such diverse locations as Singapore, Dubai, London, and New York. For more information about Ed and his work, click here.