AA - Neutral/Long
Alcoa successfully breached its downward trendline (blue) and made it past key resistance at 8.51, in line with my expectations for this stock to perform bullishly based on technicals at the time. The picture has changed somewhat.
First, note the slightly decreasing volume during its 2016 breakout signalling that its momentum is decreasing, albeit not significantly. Secondly, we can notice that the RSI is at 65 and that a sell-off of a few days is due. Finally, notice the spinning tops on the last day of trading. This indicates a tug of war between the bears and the bulls - the stock moving wildly up and down before settling into an uncertain close only a minuscule amount below its open. This is a difficult position for the stock to close at, because of key resistance it ran into at around 9.55 back in November and December. Ultimately the stock needed three tries to penetrate this level.
Assuming there is no major macroeconomic news one way or the other, I expect this stock to trade down for a few days. I see two major possibilities for it trading down. 1) a few down days in keeping with its current trend before it breaches resistance at 9.55 and establishes that price as new support while it trends for a time between 9.55 and its next key resistance at approx 10.20.
2) It may also trade dramatically lower to support at 8.50 and build moment for a time (many days) between 9.5 and 8.5.
Ultimately I think this stock is headed up for a while longer, but it needs to regain some momentum and the bullish signals are less significant than they were several days ago. Additionally, because its closer to a major resistance line at 10.20ish than it was several days ago the risk/reward is less enticing in the short term. All of this points to a neutral, take a wait and see approach.
First, note the slightly decreasing volume during its 2016 breakout signalling that its momentum is decreasing, albeit not significantly. Secondly, we can notice that the RSI is at 65 and that a sell-off of a few days is due. Finally, notice the spinning tops on the last day of trading. This indicates a tug of war between the bears and the bulls - the stock moving wildly up and down before settling into an uncertain close only a minuscule amount below its open. This is a difficult position for the stock to close at, because of key resistance it ran into at around 9.55 back in November and December. Ultimately the stock needed three tries to penetrate this level.
Assuming there is no major macroeconomic news one way or the other, I expect this stock to trade down for a few days. I see two major possibilities for it trading down. 1) a few down days in keeping with its current trend before it breaches resistance at 9.55 and establishes that price as new support while it trends for a time between 9.55 and its next key resistance at approx 10.20.
2) It may also trade dramatically lower to support at 8.50 and build moment for a time (many days) between 9.5 and 8.5.
Ultimately I think this stock is headed up for a while longer, but it needs to regain some momentum and the bullish signals are less significant than they were several days ago. Additionally, because its closer to a major resistance line at 10.20ish than it was several days ago the risk/reward is less enticing in the short term. All of this points to a neutral, take a wait and see approach.
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