Alcoa Inc. (AA) was last reviewed on July 20, and we were bullish, but not pounding the table, so to speak: "It looks like AA is poised for a test of the January-February highs in the $38-$39 area. At this juncture I do not have a strong sense that prices can clear this peak on the first try, so traders should not overweight a trade from the long side."
This stock is one of the three that Jim Cramer mentioned in a story on Tuesday morning as illustrative for how the market feels more treacherous than it looks.
AA made a new high for the move up yesterday and tested some minor overhead resistance from December and January, when prices stalled in the area north of $38. Should we look for some sideways price action, or a breakout to new highs? Let's visit with the charts again.
In this daily bar chart of AA, above, we can see that prices are above the rising 50-day moving average line and the positive 200-day moving average. The daily On-Balance-Volume (OBV) line has been rising since around the middle of June, telling us that buyers of AA have become more aggressive.
The trend-following Moving Average Convergence Divergence (MACD) oscillator is above the zero line and looks poised for a bullish crossover and outright go long signal.
All this sounds positive, and it is; but look at the volume, which has been declining during July. In our last update on AA, we did not feel that the stock would be able to break out to new highs on the first attempt -- I would continue that opinion.
In this Point and Figure chart, we can see the minor breakout at $37.85 and the price projection of $45.59.
Bottom line: I assume traders have operated from the long side on AA. I would continue to trade AA from the long side, risking a close below $35 now and look for gains in the mid-$40s.