- Posted by Greg Harmon
- on February 22nd, 2022
Here is your Bonus Idea with links to the full Top Ten:
Alcoa, $AA, has been moving higher since finding a bottom at the pandemic lockdowns. It is now approaching the pre-Great Financial Crisis levels. Today let’s look at this from a wider angle perspective. The price is getting extended from a momentum perspective with the RSI creeping into overbought territory on the weekly chart. This is strong and not extreme yet. The MACD is also at a high but not extreme level. The price is outside of the Bollinger Bands® which might delay the next leg up, but the stock is looking very strong.
There is resistance at 78.50 and 88.50 then 97 and 107.50, all from 2007 – 2008. Support lower comes at 64 and 56 then 52. short interest is moderate at 5.2%. The stock pays a dividend with an annual yield of 0.51% and has been trading ex-dividend since October 28th. The company is expected to report earnings next on April 13th.
The March options chain shows the biggest open interest at the 65 and 60 strikes n the put side and at the 75 strike on the call side. In the April options the open interest on the put side is small, but on the call side it is very large and biggest at the 80 strike then 65 and 85. The May chain is just starting but with the only notable interest at the 80 call.
Alcoa, Ticker: $AA
Trade Idea 1: Buy the stock on a move over 78.50 with a stop at 64.
Trade Idea 2: Buy the stock on a move over 78.50 and add a March 70 Put ($2.26) while selling the April 95 Call ($2.27).
Trade Idea 3: Buy the March/May 85 Call Calendar ($4.10) while selling the April 65 Put ($2.40).
Trade Idea 4: Buy the May 65/80/100 Call Spread Risk Reversal ($2.00).
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After reviewing over 1,000 charts, I have found some good setups for the week. These were selected and should be viewed in the context of the broad Market Macro picture reviewed Friday which with February options expiration in the books, saw equity markets showing further weakness.
Elsewhere look for Gold to continue its move higher while Crude Oil consolidates pauses in its uptrend. The US Dollar Index continues to consolidate in a narrow range while US Treasuries pullback. The Shanghai Composite looks to continue the broad consolidation while Emerging Markets consolidate to move lower.
The Volatility Index looks to remain elevated making the path easier for equity markets to the downside. Their charts look weak, especially on the shorter timeframe. On the longer timeframe the QQQ looks the worst with the IWM next and the SPY trying to hold onto consolidation. Use this information as you prepare for the coming week and trad’em well.
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The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.