Saturday, July 30, 2011

Trade Idea: AA long levels

If Alcoa Inc. (AA) continues down next week, it will find support at two important levels. Both of these levels combine multiple support factors and so have a high probability of bouncing.

The first level is at 14.18 which corresponds with a previous pivot high and a 50% fibonacci retracement. The second level is at 13.16--the confluence of a 61.8% fibonacci retracement and the nearby gap fill at 13.10.

I will look to enter AA long on a break of 14.18 with a stop at a confirmed daily close just below it. If this level breaks, I will enter long again at 13.10.

As with any trade, remember to take partial profits early and use a break-even stop thereafter.

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