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Aluminum Alloy Futures - Mixed Signals 
LME.AAWednesday, July 30, 2008
By Ronish Patel
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 6 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, 6 August 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.
To view this idea in our EventEdge® analysis tool click here2.
Ronish Patel3 is an analyst with MarketHistory.com.
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Let variable values:
@ = LMEAA
theEvent = IF
1 value move of @ is less than 0
AND {
(High of @ - @) is less than (0.2 * (High of @ - Low of @))
AND
(Open of @ - Low of @) is less than (0.2 * (High of @ - Low of @)) }
AND
low of @ crosses below 13 week lowest of low of @ 1 value ago
AND
@ is DEFINED
THEN 1
ENDIF
Date Day t+3 t+4 t+5 t+6 t+12
10/19/1993 Tue 0.4 0.1 -1.6 -1.6 -2.1
04/13/1995 Thu -0.8 0.3 1.0 -2.0 -4.2
01/22/1996 Mon -1.1 -1.8 -2.3 -2.4 0.4
05/20/1996 Mon -0.1 -0.6 -0.9 -1.6 -3.3
06/04/1996 Tue -1.4 -1.7 -2.9 -3.3 -2.0
09/16/1996 Mon -0.2 -0.9 -1.3 -0.5 -1.3
07/04/1997 Fri -1.7 -1.6 -2.3 -0.8 -0.1
09/17/1998 Thu -0.9 -0.9 -0.9 -0.1 -2.1
12/23/1998 Wed 0.5 -0.6 -0.9 -0.4 -0.5
02/17/1999 Wed -0.4 0.0 -0.3 0.0 -0.2
09/04/2001 Tue -0.9 -2.6 -2.1 -2.6 -2.6
07/29/2008 Tue NaN NaN NaN NaN NaN
Avg -0.6 -0.9 -1.3 -1.4 -1.6
AvgPos 0.4 0.2 1.0 NaN 0.4
AvgNeg -0.8 -1.3 -1.6 -1.5 -1.8
PctPos 18.2 18.2 9.1 0.0 9.1
PctNeg 81.8 72.7 90.9 90.9 90.9
Maximum 0.5 0.3 1.0 0.0 0.4
Minimum -1.7 -2.6 -2.9 -3.3 -4.2
StdDev 0.7 0.9 1.1 1.1 1.4
ZStat -0.9 -1.0 -1.2 -1.3 -1.1
Variance 0.5 0.8 1.2 1.2 2.1
12 Occurrences |
Comments:
Web Address of this trading idea:
Links:
2 http://www.markethistory.com/content/events/futures/chart.html?ticker=LME.AA&events=MyDown0,TrendDayUp0,Low13WeekCross0
3 http://www.markethistory.com/staff/detail.html?s=ronish