Traders and investors analyze technical aspects while making market entry and exit decisions, and moving averages and the RSI (relative strength index) are among the most widely used technical parameters. Generally, an RSI below 30 signifies oversold positions while an RSI above 70 is associated with overbought positions. In this part of the series, we’ll look at Freeport’s technical parameters and compare them with those of other miners.
100-day moving averages
Based on closing prices on May 20, 2016, Freeport-McMoRan (FCX) is trading 30% above its 100-day moving average (or DMA). In comparison, Teck Resources (TCK) is trading 38% above its 100-day moving average while BHP Billiton (BHP) and Southern Copper (SCCO) are trading at 5.7% and 1% above their respective 100-day moving averages.
Almost all the mining companies are trading above their 100 DMA, thanks to the spectacular rally in the last couple of months. However, with the recent correction in stock prices, all the copper producers that we’re covering have dropped below their 20 DMA. Some traders see the stock price falling below 20 DMA as a bearish indicator.
Relative strength index
Freeport currently has a 14-day RSI of 50. In comparison, Southern Copper has a 14-day RSI of 39, which traders see as getting close to oversold levels. Miners have delighted short sellers for the last couple of years, with the notable exception of 1Q16. In the next part of the series, we’ll explore how short sellers (SDOW) are currently playing Freeport and other copper miners.