January 24, 2022

OmahaCharts

Technical Analysis of Financial Markets

Long Is The Way And Hard, That Out Of Hell Leads Up To Light

Long Is The Way And Hard, That Out Of Hell Leads Up To Light

…Milton said that, in his epic poem in blank verse first released in 1667. Consisting of ten books with over ten thousand lines of verse, high school and college students alike have enjoyed (suffered?) through essays and book reports on this masterpiece for as long as high schools and colleges have been around. If I had to summarize my performance overall in 2018, I would borrow from Milton…

“Paradise Lost”

What started out a great year, quickly turned sour for me as I was caught off guard by sudden volatility in February and have been, like so many others have, off sides in the recent equity rout. The markets are the ultimate reminder that once you think you have things figured out, the puzzle has changed. I take pride in being able to say, “I was wrong” and greater pride in saying, “but you damn well better believe I’ll figure it out.”

I began making changes to some of my long term holdings this past week, and wanted to lay out one new position in particular and my thinking around what may propel it higher.

Aluminum Maker Alcoa (AA):

Aluminum Maker Alcoa (AA) - Long Is The Way And Hard, That Out Of Hell Leads Up To Light

I don’t make it a point to buy stocks that have been cratering toward the floorboards, but there is a specific reason I am putting together a starter in the aluminum maker.

Taking into account 5 years of daily data, AA sits atop a major Fibonacci Support Level that coincides perfectly with the Volume Point of Control. When you get these clusters of confluence, you often find a near term bounce or a reversal of a trend. At minimum, it stalls at these levels before resuming the prevailing downtrend. I have a plan in place to add on the way down (this is long term remember as opposed to a trade) and will adhere strictly to 2 more add ons at $25.50 and $20 should the price action allow me to do so.

The current environment has been ripe with short term trading opportunity for only the most nimble of participant. I think there are some long term value buys presenting themselves also. I’ll be in touch with those soon.

Happy Monday!

OC