Friday, May 11, 2007

Alcan Update May 11, 2007

In my recent first post about Alcan I indicated that I expected the price to continue sideways for a time while the trading volume became lower and lower... then break out above the recent price peak near $90.

The price has not broken above $90 yet, but it continues to shows signs of likely doing so. The daily chart shows how the volume has continually diminished since the price peaked near $90. The price and volume pattern continues to follow a pattern that I have seen many times before.

In most cases, when I see a stock price move generally sideways and the volume continually drop off, it is a signal of a strong upward price climb coming next. The same thing can happen upside down when the price is getting ready to drop lower in a longer term downward price trend.

The literature on the stock market includes a theory that the stock market is a "random walk" meaning that one cannot predict the future. I agree that to a large extent one can not predict the future except on the basis of just being a "lucky coin flipper".

However, I continue to believe, that "on occasion", patterns of price and volume become apparent that increase the odds of being correct in predicting price movement. Unfortunately, for me at least, the existence of these patterns has not translated into the ability to make "sustained stock market profits". It is also a lot of work to find and track individual stocks that exibit such patterns.

These days I just make predictions for the fun of it and keep my money in safer harbours.

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