Inside Bar/Bullish Harami on Alcoa Daily Chart

[DannyBly]

An Inside Bar is a bar which is completely within the range of the preceding bar, indicating a period of indecision or consolidation. If an Inside Bar is found at the end of a prolonged downtrend and is located near a level of support, it can signal a possible reversal in trend.

The Japanese Candlestick pattern called Harami is very similar, with a large candlestick followed by a smaller candlestick whose body is located within the vertical range of the larger body. The Bullish Harami occurs after a downtrend, with a red candlestick engulfing a small green candlestick, giving a sign of a possible bullish reversal in trend.

So in this case of Alcoa (AA) on the daily chart we have both an Inside Bar and Bullish Harami. Let's see how it plays out next week, within the context of the broader recent selloff in stocks.

Chart courtesy of Worden

 

[d3v1lsblood]

On the weekly chart
-ST EMA is still below LT EMA.
-MACD still below 0 and flat.
-ADX is still negative and flat.
-FI might be forming a bullish divergence if a shallower bottom is traced


On the daily chart
-ST EMA is still below LT EMA.
-MACD negative
-ADX is negative

Given the market conditions, and the fact that AA shed ~50% of its value this year, I would not go long on AA as of now.
AA just dropped from $11.50 to ~$9 within the past month. That's almost 30% of its value. A stock which just falls after a such a steep drop is like a man which falls from a height, its unlikely to just get up and start running again. I reckon it'll stay down or test new lows. Given that volume for the recent weeks are high, showing bears are still very strong.

 

[numbertea]

I would say that this looks more like a continuation pattern situation. I would call it a reversal maybe to fill previous gap of two days ago but just for short covering. I don't see the bulls coming in just yet but I would look out in next couple days for only a strong bullish candle like Engulfing if I was going to get in. Even with good entry the upside may become limited by the previous gaps that occurred on the way down.