Alcoa lost... but MarketClub members won.

Canadian aluminum company, Alcan (AL), had some decisions to make. Who's offer to take... Alcoa (AA), one of the globe's leading suppliers of bauxite, alumina and aluminum, or Rio Tinto (RTP), a leading company in mining and mineral processing. After Rio Tinto offered $101 (USD) per all Alcan's outstanding common shares (a total equity consideration of $38.1 billion), Alcan rebuffed on previous offer by Alcoa for $28.7 billion. Bloomberg suggests that speculators feel that Rio Tinto's bid will spark more aluminum-industry takeovers.

What About ALCOA?

How did Alcoa make out after the rejection? Well, with an open (7/12) of over 5.3% increase from previous days close, and since had an additional 3.8% increase in after hours trading between the 7/12 and 7/13. If MarketClub members had been using the suggested technique they would have been in a position to gain off the rejection of the Alcoa bid.

Monthly Weekly

Alcoa - We were given a monthly green triangle on 11-22-06 @ 30.32. We could have taken this as in initial entry point, or we could have used it to signify that we should be taking long position on green weekly triangles. Let's say we used it to enter. We then use the weekly chart for exits and reentries. See table below for triangle signals loss and gains.

Entry Date Price Exit Date Price Loss/Gain
11-22-06 30.32 12-21-06 29.85 -.47/share
1-19-07 31.17 3-5-07 32.13 +.96/share
4-03-07 34.56 4-24-07 33.69 -.87/share
5-07-07 36.5 6-27-07 38.25 +1.75/share
7-12-07 42.9 Current 47.1 +4.2/share if sold off
Up $5.48 Per Share
Let's Hear It For ALCAN
How did Alcan do after the big news? Well, with an close of $89.6 on 7/11, after hours trading helped AL open at $98/share... an $8.4 per share increase... a whopping 9.4% gain overnight. If MarketClub members had been using the suggested technique they would have been in a position to earn big throughout the whole year with Alcan.


Monthly Weekly

Alcan - We were given a monthly green triangle on 11-21-06 @ 48.46, by the congruence with AA we can see that the industry trend had changed in late November. We could have taken this as in initial entry point, or we could have used it to signify that we should be taking long position on green weekly triangles. Let's say we used it to enter. We then use the weekly chart for exits and reentries. See table below for triangle signals loss and gains.
Entry Date Price Exit Date Price Loss/Gain
11-21-06 48.46 12-19-06 47.22 -1.24/share
1-12-07 49.78 3-1-07 50.11 +.33/share
4-09-07 53.78 6-26-07 81.5 +27.72/share
7-03-07
84.97
Current
97.67
+12.7/share
Up $38.85 Per Share
What's Next
Will Rio Tinto/Alcan try to bid on Alcoa? Does the removal of Alcoa's bid signify weakness... and if so, will they be the next company to be taken over? I think anything is still a possibility. The important lesson is to not follow the hype, but listen to the market. Our club members were guided to a $5.48/share profit with AA and $38.85/share profit with AL. No hype, just with triangles.

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Best Wishes,


One thought on “Alcoa lost... but MarketClub members won.

  1. Hi Lindsay

    You are doing a great job. Thanks for putting us in touch with the great blog at RebelTraders. That guy has some very professional looking stuff out there and we can learn from him. I see you have invited him to share some insights at ino from time to time. Great work on building a trading community. You da MAN - even though you are a girl !! Keep up the good work and thanks for your consistent contributions.

    Chuck at http://www.rebeltraders.net
    p.s. - Today I was contacted by Lindsay, a wonderful lady at http://www.ino.com/ asking if I would be interested in providing some guest commentaries for their site. So from time to time I will provide her with some articles that I write and she will share with me some of their content in return. Thank you Lindsay for considering my market views as worthy for your site.

    Thanks
    TBeard

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