Our “Best AM Idea” that we tweet each morning as part of our morning roundup blog is a trade idea that is based on all of the information we have prior to the market’s Open. Yesterday, I suggested that FCX be bought on a pull back to 71.50. FCX has traded down about 20% since reaching a 52 week high up around 90 on January 11th. The prior day, it bounced nicely in the afternoon and was gapping up in the morning. It was a perfect candidate to buy on a quick drop on the Open. I was willing to risk 15 cents to catch 2-3 points of upside.

But a funny thing happened on the Open yesterday. The market came off hard and dropped the 109.80 support prior to FCX trading down to 71.50. By the time FCX was heading towards our buy price of 71.50 the market had already attempted to rally above 109.80 and had failed. My mindset was that I should be focusing on my short setups rather than longs since our next support on the SPYs was 108.20. Nevertheless, I put on a small long trade on FCX when it traded down to 71.50. In fact, since the market was coming off so quickly I figured the 71.50 bid would get hit out so I bid 71.42 for some stock. My bid got hit and FCX actually traded up to the 71.60s. Unfortunately, it quickly went to the low and I got stopped out at 71.35.

After I got stopped out, that silly program that Bella so often talks about, “buy the new low”, caused FCX to spike back up to 71.87. I was not fooled. I began trading it on the short side. The “buy the new low” program was overwhelmed when it dropped the 71.35 level and it traded down to 70.87. When it quickly popped back up to the 71.30s, similarly to the move from 71.35 to 71.87, I shorted some more stock. I covered my position into the next down move to the 70.60s.

About an hour later FCX popped back up to 71.50. I failed to short it there as I was engrossed in my AAPL short that was tanking at the time. FCX trended down for the next two hours to 68. The 71.50 level that originally was intended as our “best am idea” on the long side became our best “lunchtime idea” on the short side. As a trader you must always be flexible and re-evaluate planned trades based on the data the market is presenting.

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