Spotting Potential Long Breakouts – Stocks – Alcoa (AA) - Daily

3 feb 2022

AA

Alcoa (AA) is at an all-time high of 62, which it last saw in April 2018. It plummeted after reaching that high and took until now to regain the loss. That’s almost a four-year gap. The question is now what will happen. Is it going to go up or down?

We can deduce a few key chart patterns by looking at the daily chart. Marking out the long-term upward trend from March 2020, we can see that it has had its retracement at the price of 53, which can also be considered an area of support looking to the left.

Not to mention if we grab our trusty Fibonacci Retracement, we can see that it also hits the 50% support level at this exact spot and pushes up.

If we have to draw an Ascending Triangle from the three lowest valleys and connect them to the level of resistance at its current high price, we can see that price within this pattern has actually made a partial rise.

We can see that there has been selling pressure on three specific days trying to keep the price from rising, and volume on those days has significantly increased. If we had to go down to the 1-Hour or 30-Minute time frame, we could see these levels of selling pressure actually create a Triple Top.

However, to confirm this, we need to see price break below the lowest valley between these peaks, which has not happened yet. Price seems to be moving steadily upward. Additionally, we could say that a double bottom has formed at the levels of the upward trend line and that of the Ascending triangle at price 53 and 55).

Also, take note of the strong buying pressure at price 53. Moreover, the second part of the Double Bottom (price 55) is making a series of higher lows. This could also indicate an upward momentum shift.

However, just like the Triple Top, the price has not closed above the peak between these two valleys, so it is not confirmed yet, but it is inching closer and closer to that level.

Another factor to consider (if we look back at the daily chart) is that price has moved to pass the HCR (horizontal consolidation area) - the orange rectangle. This means if price moves lower, it will probably stall here, but moving upward, it is free to run.

If you are looking to go long here, I suggest waiting for the close at least above the level of resistance at 64.35. However, the resistance level is more likely at 65 (a SAR round number). I would enter the trade long only if price closed above 65.

The possibility of it going down as it did from its last high is also a possibility, but the repeated pushing of the price action heading up and up trying to smash through resistance along with increasing volume over time would suggest that it might break upward and in a big way.

I’d be considerate and place my profit at about 70. This would net you about an 4% return (4 to 1) if you place your stop just below the resistance that will undoubtedly turn into massive support at the price area of 62 – 64.