Friday, September 13, 2013

AA Alcoa Weekly Chart Falling Wedge Positive Divergence Price Extension Requires Reversion

As the saying goes, there is a fine line between love and hate, just as there is a fine line between a descending triangle (bearish pattern) and a falling wedge (bullish pattern). Usually it is easier to make the distinction between the two patterns but AA keeps you guessing. The red descending triangle has a base at 8.2 exactly where price is now back kissing. The descending triangle pattern would target 5.2 which would obviously be in concert with massive and tragic global turmoil. The green falling wedge is a rosier outcome and price broke up and out of the upper green trend line to point the way higher. So this is an interesting juncture, price back testing the descending triangle, and breaking out from the falling wedge at the same time. One of them is wrong.

Double A was kicked out of the Dow Industrials Average, thrown out like an old used-up dirty rag. This bad news has only resulted in price buoyancy, a bullish indication. Ditto the indicators that show positive divergence and long and strong behavior in the RSI and money flow pointing to higher prices ahead. The price extension to the downside (purple dots) is another feather in the bull's cap. A reversion to the mean is required which very simply means 'up'. AA is an attractive stock from a perspective of a hiding place for money in the event of a strong flush downward in the stock market. The recent uber lows in the CPC and CPCE put/call ratio's must be respected and this level of complacency and lack of fear about any market downside ever occurring again will likely be crushed. So taking money on the successful longs is in vogue right now, exiting those trades, and considering places like AA to stash the money for a while to see what happens in the markets. Projection for AA is sideways to sideways up for the weeks and months ahead with the green falling wedge pattern favored. This information is for educational and entertainment purposes only.  Do not invest based on anything you read or view here.  Consult your financial advisor before making any investment decision.

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