Aluminum Alloy Futures (LME.AA) gapped lower on Tuesday, where the day's intra-day high was lower than the previous day's low price. After opening the session at its intra-day low, AA traded upward seeing a 'trend day' up pattern, where the open was in the lower 20% of the day's range while the close was in the upper 20%. Nevertheless, AA recorded a decline of 1.7% on the day and closed at 2555. The open of 2550 was also a new 13-week lowest low. How will AA react to the fake decline?
Q: How has LME.AA performed in the past, omitting repeat occurrences within 10 trading days, when, while crossing below its 13-week low, it records a decline on a 'trend day' up pattern?
A: According to the 11 previous occurrences of this event, EventEdge indicates that LME.AA has shown a strong bearish edge that peaks six trading days after the event. Thus, the projected date for the peak of the bearish edge relative to the current event date (Tuesday, 29 July 2008) is Wednesday, August 6, 2008. LME.AA declines in 91% of the cases (10 of 11) by an average of 1.5% relative to the close on the event date. The overall return of the 11 cases is -1.4%, which, based on the close of LME.AA on the event date (2555), provides a target price of 2519.2.
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Ronish Patel is an analyst with MarketHistory.com.
