Alcoa Corporation (AA) Price Forecast: Bull Flag Breakout Signals Trend Continuation

Bull Flag Breakout Confirms Trend Continuation

A bull flag pattern breakout triggered in the stock of Alcoa Corporation (AA) on Monday, concurrent with a reclaim of the long-term 20-day average. Strength was confirmed by a closing above the $61.11 breakout level and the highest daily closing price in 12 days. The advance also triggered a trend reversal with a recovery of a lower swing high on the daily chart and a higher weekly low on the weekly timeframe, at $62.06.

Buyers Defend 20-Day Average Following Breakout

Buyers remained in control on Tuesday, with strength indicated by a bounce off support near the 20-day average ($60.95) and the downtrend line at the top of the flag. The low for the day was $60.74, which was followed by a slightly new high of $63.34. Although a relatively narrow range day occurred, showing a slowdown in momentum relative to Monday, bullish signs suggest higher prices. That is, unless there is a sustained drop below the 20-day average before a lower swing high at $63.54 is exceeded, providing additional confirmation of a bull-trend continuation.

Higher Swing Low Reinforces Ongoing Uptrend

Higher swing low established last week at $55.30, with support identified by several indicators. A 38.2% Fibonacci retracement of the most recent upswing is at $54.91, and the 50-day average nearby is now at $55.02 and rising. This marks the third day up with higher daily highs and lows, from that low. Thus, given the strength needed to move through a price range, a day of rest above the flag breakout level at the 20-day average is healthy for the breakout.

Near-Term Support Failure Risks Breakout Retest

But if today’s low fails as support, along with the 20-day average, momentum would be weakening rather than improving. Unless those levels are recovered quickly, Monday’s higher daily low of $58.67 may be tested, putting the bull flag breakout at risk of failure.

Measured Move and Fibonacci Levels Define Upside Targets

A measuring objective from the flag pattern is around $87.87, starting the pole at the $40.38 high from November 10. That provides a potential long-term target. In the shorter timeframe, a 61.8% Fibonacci retracement of the bearish correction following the 2022 top is at $68.84. Close by is a 127.2% extension of the drop that formed the bull flag at $70.12. A little higher is a 161.8% Fibonacci extension of the flag at $74.15.

If you’d like to know more about chart patterns and how to trade them, please visit our educational area.