Resting Period for Freeport-McMoran (FCX)?

All commodity stocks are pulling back 2 to 3% today on the back of news from China that they might withdraw some of their economic stimulus. For now it is just news and the chatter on the street. More than 80% of the time, I take all the chatter on CNBC with a grain of salt.

Anyway, FCX is one of them that is pulling back. They report earnings tomorrow, Thursday, morning before the market opens. After fantastic gains in 2009, I think FCX is ready to pause and digest some of those gains. I also believe this "pause" could last many months to come.

Looking at the daily chart and support and resistance lines, I expect FCX to stay within its 52-week high of $90 and previous double bottom in mid-Dec of $75. So, I want to establish a trade that benefits the most if the stock stays in this range. I like Double Diagonal Straddle Swap:

- Buy to open Mar $90 strike calls

- Buy to open Mar $75 strike puts

- Sell to open Feb $85 strike calls

- Sell to open Feb $80 strike puts

The whole trade can be done for a net credit of $1.00. As with all my other trades, I always favor a set up that has positive Theta and this FCX trade is no different. The attached P&L chart shows $75 and $90 break even points. I have also marked this range in the daily chart.

Good luck!