After years of back-to-back declines, Freeport McMoRan is showing signs of life.
The left-for-dead stock rallied nearly 7 percent Tuesday after the mining giant reported a narrower-than-expected quarterly loss. According to one trader, this could be the start of a furious rally over the course of the next year.
Looking at a long-term chart of Freeport-McMoRan, Andrew Keene noted that after getting pummeled over the last few years, the shares have consolidated in 2016. "This means there is a battle between the bulls and the bears on where they think the stock could go," he said.
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Shares of the commodity-sensitive stock have fallen more than 90 percent in the last five years, as oil and prices have gotten crushed. But that's all come to a head as Keene believes the commodity space could be turning around.
"I think it has bottomed." Freeport-McMoRan hit a multiyear low of $3.52 just last week. "The stock is going higher," added the founder of AlphaShark Trading.
"I think we could get back up to $8 to $10 by January 2017," said Keene. That's as much as a 138 percent move from its current trading price of around $4.20 a share.
To play for a move higher, Keene bought a call spread. This is a bullish strategy where a trader will buy a call and then sell a higher strike call of the same expiration to offset the cost. The goal is for the stock to rise to the call you are short.
Specifically, Keene bought the January 2017 5/8 call spread for 60 cents. "If Freeport-McMoRan closes above $8 by January 2017, which isn't that much considering the stock was trading at $18 last summer, then I can get 400 percent returns on my trade," he said.