Buy Alert: February 25, 2013

Marcus Haber | February 25, 2013

Buy Alert: February 25, 2013

Trade Details

Buy Freeport-McMoRan (FCX) April 2013 $34 Calls for $0.75 or better

Why?

FCX has pulled back in recent days for a couple reasons. First, the market has sold off in general due to concerns over the automatic spending cuts set to occur in the next few days. Second, gold and other commodities have taken a hit due to the possibility of higher interest rates if the Fed adjusts their bond-buying program.

I think both reasons are overstated and the pullback in FCX is overdone.

First off, the most likely solution to the automatic spending cuts is another delay until a more permanent budget can be agreed upon. More importantly, I believe we are in no danger of higher rates. It will be quite some time before the Fed makes any adjustment to rates. And, any changes to their bond-buying program would like be of little to no impact at this stage.

As such, it’s time to buy FCX calls on the recent dip. I could easily see the stock get back to the 50-day moving average – or even the 200-day average – in the near future.

We’re going to give ourselves a little extra time and grab the April calls.