Copper Prices, Analyst Confidence Lift FCX Stock

FCX has been trending higher since last month's low

Josh Selway
Sep 13, 2019 at 10:18 AM
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Freeport-McMoRan Inc (NYSE:FCX) has been trying to recover from last month's 52-week low of $8.59, and today the shares are on the rise again. Helping their cause is rising copper prices, along with upbeat attention from Wall Street analysts. Specifically, Jefferies in a note this morning said the mining sector could see a recovery in demand soon, especially if the U.S. and China strike a trade deal. The brokerage firm said FCX stock is undervalued, and it could benefit from the company's operations in Indonesia.

In response, the security is trading up 2.8% at $10.66, putting it on pace to close above the 50-day moving average for the second time since Aug. 1. The 200-day moving average should also be on traders' radars, since this trendline, positioned at $11.33, blocked the equity's breakout attempt in July.

Call options traders certainly have been aggressive toward Freeport, with many targeting the stock for a potential breakout. Data from the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) shows a 10-day call/put volume ratio of 6.98, a reading that ranks in the 93rd annual percentile. In other words, there's been huge demand for long calls.

Looking closer, the October 11 call saw the largest increase in open interest by far during that two-week time span, with more than 20,700 contracts added. Heavy buy-to-open activity can be confirmed here, showing many have been betting on FCX shares taking out $11 in the weeks ahead.

For perspective options traders, premiums look attractive at the moment, since the 30-day at-the-money implied volatility of 39.9% ranks in the low 20th annual percentile. Early on today, calls are indeed crossing at an accelerated rate, though that may be due to closing activity at the aforementioned October 11 call.

 


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