Alcoa Corporation produces and sells bauxite, alumina, and aluminum products. The company offers aluminum sheets for the production of cans for beverage and food. It also engages in the aluminum smelting, casting, and rolling businesses; and generation and sale of renewable energy, as well as provision of ancillary services.
Take a look at the 1-year chart of Alcoa (NYSE: AA) with the added notations:
AA has a major level of support at $40 (green). The stock has made its way back down to that level again, and traders could expect some sort of a bounce. However, if the $40 support level were to break, lower prices should follow.
The Tale of the Tape: AA has key support at $40. A trader could enter a long position at or around $40 with a stop placed under the level. If the stock were to break below the support, a short position could be entered instead.
Before making any trading decision, decide which side of the trade you believe gives you the highest probability of success. Do you prefer the short side of the market, long side, or do you want to be in the market at all? If you haven’t thought about it, review the overall indices themselves. For example, take a look at the S&P 500. Is it trending higher or lower? Has it recently broken through a key resistance or support level? Making these decisions ahead of time will help you decide which side of the trade you believe gives you the best opportunities.
No matter what your strategy or when you decide to enter, always remember to use protective stops and you’ll be around for the next trade. Capital preservation is always key!
Christian Tharp, CMT