We have focused on Action Alerts PLUS holding Arconic (ARNC) in recent days, paying attention to how it sold off and rebounded in November. The company was formerly part of Alcoa (AA) separating from it last month.
Arconic recently made it on Jim Cramer's list of 10 companies that could be acquired in 2017, with Cramer saying Honeywell International (HON) and Eaton (ETN) should be prospective buyers as aerospace makes up about 41% of Arconic.
So, with that in mind we want to take another look at this security with more of an investor's eye than a trader's mindset.
If we look closely at this daily chart of ARNC, above, we can see that prices rallied Monday back to the declining 50-day simple moving average line. A breakout over the average line could happen today and give the chart a more positive spin. The next chart hurdle would be the rising 200-day line, which intersects just below $22. The 200-day average line stopped the last rally at the end of October/beginning of November.
With the On-Balance-Volume (OBV) line improving from an October low I feel that the 200-day line may not be much of hurdle for the bulls.
In this weekly chart of ARNC, above, we don't have much change but the Moving Average Convergence Divergence (MACD) oscillator in the lower panel has begun to narrow toward a cover shorts buy signal. The weekly OBV line has been pointed up from lows in August 2015 and January 2016.
Strategy: ARNC still needs to prove itself so buying on strength is the way I would operate. I would buy on a close above the 50-day average. Then a close above the 200-day average and then closing above the resistance in the $24-$25 area. A decline back down to $18 would give the bears the upper hand.
