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Aluminum May Extend Losses on Bear Flag: Technical Analysis

Aluminum prices, down 6.5 percent this year, probably will extend the slump to the lowest since October on the London Metal Exchange, according to technical analysis by Matt McKinney at Zaner Group LLC.

After touching a low of $1,934.85 a metric ton on March 11, prices jumped two days later to $1,996.25, creating a so-called bear flag pattern that signals a drop by the end of this month to $1,887, the lowest since Oct. 29, McKinney said. A bear flag, named for its resemblance to an inverted flag on a pole, occurs when a security is declining, pauses and consolidates, and then continues its drop.

“There was a valiant effort to get prices back up, but sellers came in heavy the past few days,” McKinney said in a telephone interview from Chicago. “There’s considerable momentum to the downside now. It’s a convincing bear flag.”

Aluminum for delivery in three months rose 0.1 percent yesterday on the LME, paring the metal’s decline in March to 3.3 percent. Prices tumbled 4.1 percent in February, the biggest monthly loss since October.

In technical analysis, investors and analysts study charts of trading patterns and prices to predict changes in a security, commodity, currency or index.

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