MW This stock should rally due to Trump and AI. These charts hint it will soon.

By Tomi Kilgore

Freeport-McMoRan's stock is being hurt by investor rotation out of the U.S. market but should rally as copper prices surge

Sometimes the fundamentals seem to line up for a stock to rally, but it falls anyway because of factors that aren't necessarily related to the company's business.

That seems to have happened to Phoenix-based copper miner Freeport-McMoRan Inc.'s stock $(FCX)$. But as J.P. Morgan's technical team says, the stock is now showing positive chart developments, and it looks like a good time to buy it.

J.P. Morgan suggests the weakness in Freeport shares has a lot to do with investors recently rotating out of U.S. stocks and into foreign markets, such as Europe, given all the uncertainties over how the Trump administration's trade and geopolitical policies will affect the U.S. economy.

The following chart depicts how sharp the divergence has been between the SPDR S&P 500 exchange-traded fund SPY and the iShares Europe ETF IEV, particularly since mid-February:

But history suggests Freeport's stock should be following copper prices, which are rallying, more than the broader U.S. market.

For the two years through the end of 2024, the correlation coefficient between Freeport's stock and copper futures (HG00) was 0.91, in which a 1.00 reading means they are exactly aligned. For Freeport's stock and the S&P 500 ETF, the correlation was just 0.57.

While divergences between Freeport's stock and copper prices have happened before, they don't usually last very long, and the more pronounced ones tend to resolve in the direction of copper prices.

There's no reason to believe Freeport's stock won't start correlating with copper again, or that copper's rally will stall.

President Donald Trump has directed U.S. Commerce Secretary Howard Lutnick to mitigate any threat that importing copper might pose to national security, through means including potential tariffs and incentives to boost production in the United States.

Freeport Chief Executive Kathleen Quirk said there could be a downside to prolonged tariffs and all of Trump's tough talk on trade, as another surge in inflation and a full-out trade war could hurt global economic growth. But currently, Trump's talk has boosted the premium paid for copper produced in the U.S. over copper produced internationally.

And that's helping Freeport. Quirk said the company has one of only two U.S. copper smelters, so its copper business is "fully integrated" in the country: "As of right now, this premium of U.S. copper is helping us from that perspective of generating higher revenues for our U.S. priced copper," Quirk said, according to a FactSet transcript of her appearance at a Feb. 24 industry conference.

She added that Freeport doesn't have "a significant amount of copper that we need to import into the U.S." to meet customer requirements.

But Trump's backing isn't the only reason Quirk is "very bullish" on copper prices. Another reason is the rapid growth of artificial intelligence.

She said that with all the money going into building out AI infrastructure and technology, "that requires a lot of power" and "very significant amounts of copper in all those data centers."

With that as the fundamental backdrop, another reason J.P. Morgan technicians are recommending buying Freeport's stock is that it is building "what looks like a bullish reversal pattern" in the current shorter-term downtrend.

The stock is currently bouncing off support at the bottom of a declining channel, suggesting the next move may be higher.

"A break through the nearby 50-day moving average would set the stock up for a test of key pattern resistance at $41.05-$41.27," J.P. Morgan technicians wrote in a note to clients.

The 50-day moving average is viewed by many as a shorter-term trend tracker, and previous crosses above and below that line have often triggered further gains and losses. That line currently comes in at $38.07, according to FactSet.

And that resistance level equates to previous short-term peaks seen in late January and mid-February.

If the stock can clear that resistance range, J.P. Morgan sees the $45.60 level as "a minimum target" for bulls.

That level is technically significant, because it represents the 61.8% retracement of the decline, from the Sept. 26, 2024, intraday high of $52.61 to the March 4 low of $34.26.

Many Wall Street followers of the Fibonacci mathematical ratio of 0.618, referred to by some as the "golden" or "divine" ratio because of its prevalence in natural systems, believe retracements are often attracted to Fibonacci ratios, which also include 0.382 (1 minus 0.618) and 0.500.

If Freeport's stock can surpass the 0.618 retracement level, Fibo followers will start to believe the rally is no longer governed by its previous downtrend.

Another technical signal on the bulls' side is that the relative strength index, an underlying momentum tracker, has been making higher lows while the stock was making lower lows.

This pattern is referred to as bullish technical divergence, because when it occurs, the stock tends to follow the new RSI trend.

For example, there was bearish technical divergence when the RSI turned lower in early April while the stock kept rising. Eventually the stock peaked in mid-May and followed the RSI's lead.

-Tomi Kilgore

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March 06, 2025 16:31 ET (21:31 GMT)

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