Alcoa Aluminum update [AA]

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Back in this June post I called a bottom on Alcoa and claimed I was bullish on the stock.  That post contains my very high level model of the stock.  In short, I think it just ended a failed 5th wave from the crash that started in 2008.  That means, at the very least, a nice a-b-c move upward, probably driven by inflationary fears.  It was $7.86 per share back then. 

I have been patiently watching it since then and have written a couple other posts about it in the meantime.  But it recently broke out of a near term resistance point that is potentially important and so I think it is a good time for another look at the chart with some additional EW modeling details.  The key thing I am trying to ascertain right now is whether my call of a failed 5th wave is going to pan out or not.  The best way for that to be proven true will be for the chart to put in 5 waves up right here, right now.

From the chart below you can see that I labeled what I think is 1 and 2.  Now, with this breakout, I think we are working on 1 of 3.  Then 2 of 3 should provide a pullback and then finally, and importantly to my current model prediction, 3 of 3 should break through the down sloping red line which has been a resistance trend line since Sept 2011.  If the chart breaks out of this resistance it will likely require the power of a 3rd wave to do so and thus it becomes an important data point if it happens.  If it hits that red resistance line and cannot break through then a rethink will be in order.  However, it would be common for one more failed test from below followed by a small pullback and then a high volume breakout.  I suspect it will occur as a result of AA's 3rd quarter earnings since they have been profitable for the past quarter.  The inflation tide is swinging toward Alcoa and the market will be quick to notice and even to be forward looking about it IMO.