The most wonderful time of the year for AA

Feb 5th, 2010 – 1 Comment

What I also see is a small double bottom off support which is a reversal pattern indicating that the selling that started in the middle of January could be coming to an end.


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Alcoa

I am thinking of switching out of BCE to AA-NYSE.

Totally different investments, but seasonality may say now is the time to get long AA.

What does the Master think?

Cheers,

Steve

 

Hi Steve,

 Alcoa ( AA NYSE ) is part of the materials sector and according to Brooke Thackray’s  “2010 Investors Guide : How to Profit from Seasonal Market Trends” the sector enjoys a period of strength from late  January to late April. Full disclosure, Brooke and I are both participants in the Oakville Chapter of the Canadian Society of Technical Analyst and I have a lot of respect for his work.

 

AA

The thing that Brooke will tell you is that seasonal influences are not a guarantee. There is always a probability that a seasonal trend will not emerge. That being said lets look at the three year chart and get a view of trend, support, and resistance.

What I see in the chart is that the uptrend on AA has been broken and that the stock is now testing support in its 200 day moving average. What you need to make this trade work is to make sure you protect the down side. If we don’t get a bounce off these levels we could retrace back to $10.00 where we find the next level of support.

 

AA3

The six month chart gives a close up of the current trading in AA. I have added the fast stochastic indicator to this study to see if it adds to a case for a buy. The MACD seems to be flattening out and making a bit of a turn upward suggesting a bounce is developing. The fast stochastic is doing much the same but neither has made the turn yet. What I also see is a small double bottom off support which is a reversal pattern indicating that the selling that started in the middle of January could be coming to an end.

A seasonal uptrend in the sector, with the MACD and fast stochastic flattening out, and a double bottom off support make for a trade with upside potential. If you enter at this point look for resistance at $14.50.

 

MAKE IT A HUGE FEBRUARY AND HAPPY CAPITALISM!

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