Alcoa in a very Tight Range

Published on Wednesday, 01 September 2010 04:28 Written by Christian Paolinetti

New York, September 1st (TradersHuddle.com) - Shares of Alcoa, Inc. (NYSE:AA) closed the trading session at $10.22 placing the price action in a very tight range, given that calculated support is set at $9.92 and the calculated resistance based on an algorithm of peaks and troughs is set at $10.46

Alcoa Inc. produces primary aluminum, fabricated aluminum, and alumina, and participates in mining, refining, smelting, fabricating, and recycling. Its products are used in aircraft, automobiles, commercial transportation, building and construction, oil and gas, defense, and other industrial applications. Alcoa was founded in 1888 and serves customers worldwide.

Alcoa's stock price action indicates that both sellers and buyers are materializing very close to each other, which is indicative to a momentum building area, as the stock can resolve by breaking out of the tight range that developed.

Traders wanting to establish a position should place close attention to Alcoa's price action, as any movement outside its predefined range of $9.92 and $10.46 could grab the attention of momentum buyers, looking for a big movement in the price of the stock. Traders need to be aware that tight range resolution works both ways, hence, a move below support at $9.92 could spark above average selling. A tiered approach can be a good way to approach starting a position in Alcoa's, by establishing a starter position while the stock is in the tight range, and then adding to the position as it breaks and closes above resistance.