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Technical Analysis CENX AL Short Term Stock Plays
Monday, February 27, 2006

February 27, 2007
Morning/Noon Update - Adding as Longer Term Plays (Ignore Bottom Charts That Say Short Term Portfolio)

I just want to remind you that last week we were selling our stocks into the rally. I issued 8 sell alerts. 6 sell alerts were for profits, and 2 were for a loss. I have been waiting to buy two stocks. They are AL and CENX. AL Is a component of the $CRX. As I have stated on many previous updates, the $CRX is in a secular bull market and is heading higher long term. Therefore, I want to pick up AL and CENX. I have been waiting for a really good sell off to get in these, but we were never given that opportunity, until today. You can see that the put call ratio is at extremely high levels indicating extreme fear. These are the best times to buy. You have to act counterintuitively at time like these. Today is our perfect buying opportunity for AL and CENX. We want to buy good names at times like these. Please go back and listen to last night's update.

Alcan Aluminum Ltd. -(AL) - Backtest of Bullish Ascending Triangle Breakout - Aluminum.
If you look at the chart from February 12 you can see that AL is in a bullish ascending triangle pattern. Now scroll back up and look at today's daily chart. You can see that today AL is Backtesting the top of the triangle and filling the gap. This drop is occurring on light volume. AL has dropped below the 13 EMA and is headed towards the 34 EMA. The indicators and oscillators are in a 123 bullish rend reversal.

Century Aluminum Co. -(CENX) - Bullish Ascending Triangle Continuation Pattern - Aluminum
If you look at the chart from February 12 you can see that CENX is also in a bullish ascending triangle pattern. Now scroll back up and look at today's daily chart. You can see that today CENX is backtesting the top of the triangle. This drop is occurring on light volume. CENX has dropped below the 13, 34, and the 50 EMA. However, you can see that CENX bounced off the 50 EMA quite nicely. The indicators and oscillators are in a 123 bullish rend reversal.

Edited by :Andrea Victoria Friend aka Daisy
Editorial Assistant for Trending123.com

Triangle Chart Pattern - Ascending Triangle

 

Implication

An Ascending Continuation Triangle is considered a bullish signal. It indicates a possible continuation of the current uptrend.

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Description

An Ascending Continuation Triangle shows two converging trendlines. The lower trendline is rising and the upper trendline is horizontal.

This pattern occurs because the lows are moving increasingly higher but the highs are maintaining a constant price level.

The pattern will have two highs and two lows, all touching the trendlines.

This pattern is confirmed when the price breaks out of the triangle formation to close above the upper trendline.

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Volume is an important factor to consider. Typically, volume follows a reliable pattern: volume should diminish as the price swings back and forth between an increasingly narrow range of highs and lows. However, when breakout occurs, there should be a noticeable increase in volume. If this volume picture is not clear, investors should be cautious about decisions based on this Triangle.

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Important Characteristics

Following are important characteristics about this pattern.

Occurrence of a Breakout

Technical analysts pay close attention to how long the Triangle takes to develop to its apex. The general rule is that prices should break out - clearly penetrate one of the trendlines - somewhere between three-quarters and two-thirds of the horizontal width of the formation. The break out, in other words, should occur well before the pattern reaches the apex of the Triangle. The closer the breakout occurs to the apex the less reliable the formation.

Duration of the Triangle

The Triangle is a relatively short-term pattern. It may take between one and three months to form.

Shape of Triangle

The horizontal top trendline need not be completely horizontal but it should be close to horizontal.

Volume

Investors should see volume decreasing as the pattern progresses toward the apex of the Triangle. At breakout, however, there should be a noticeable increase in volume.

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Trading Considerations

Duration of the Pattern

Consider the duration of the pattern and its relationship to your trading time horizons. The duration of the pattern is considered to be an indicator of the duration of the influence of this pattern. The longer the pattern the longer it will take for the price to move to the target price. The shorter the pattern the sooner the price move. If you are considering a short-term trading opportunity, look for a pattern with a short duration. If you are considering a longer-term trading opportunity, look for a pattern with a longer duration.

Target Price

The target price provides an important indication about the potential price move that this pattern indicates. Consider whether the target price for this pattern is sufficient to provide adequate returns after your costs (such as commissions) have been taken into account. A good rule of thumb is that the target price must indicate a potential return of greater than 5% before a pattern should be considered useful. However you must consider the current price and the volume of shares you intend to trade. Also, check that the target price has not already been achieved.

Inbound Trend

The inbound trend is an important characteristic of the pattern. A shallow inbound trend may indicate a period of consolidation before the price move indicated by the pattern begins. Look for an inbound trend that is longer than the duration of the pattern. A good rule of thumb is that the inbound trend should be at least two times the duration of the pattern.

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Criteria that Supports

Support and Resistance

Look for a region of support at the lowest low and a line of resistance at the top of the Triangle.

Moving Average

Compare prices to the 200 day Moving Average. When prices are close to or touch the 200 day Moving Average this signal is considered stronger.

Volume

A strong volume spike on the day of the pattern confirmation is a strong indicator in support of the potential for this pattern. The volume spike should be significantly above the average of the volume for the duration of the pattern. In addition, the volume during the duration of the pattern should be declining on average.

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Criteria that Refutes

No Volume Spike on Breakout

The lack of a volume spike on the day of the pattern confirmation is an indication that this pattern may not be reliable. In addition, if the volume has remained constant, or was increasing, over the duration of the pattern, then this pattern should be considered less reliable.

Short Inbound Trend

An inbound trend that is significantly shorter than the pattern duration is an indication that this pattern should be considered less reliable.

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Underlying Behavior

This pattern with its increasingly higher lows and constant highs indicates that buyers are more aggressive than sellers. The pattern forms because of a supply of shares is available at a fixed price. When the supply depletes, the shares quickly breakout from the top trendline and move higher.



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