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Bob Ricco
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Bob Ricco is an independent analyst and investor who have large experience in the international stock market. Bob has a degree in engineering and has attended numerous courses in finance and economics. After graduation he was a lecturer at the university, then manager at: Ansaldo Reg. SpA... More
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  • Altria Group Inc. Entry Levels To Buy

    In my previous analysis, titled " Altria Group Has Huge Fair Value, Solid Dividends And A Favorable Trend ", I had indicated the reasons why the Altria Group (NYSE:MO) might be a good investment

    In summary, Altria Group has a very attractive price compared to its Fair Value. It has an acceptable risk, rather high dividends, and it's in an uptrend in the medium/long term.

    In the same article I also indicated that, based on technical analysis of the price-volume action, after reaching a maximum recorded on March 27 at $35.47, the price dropped for five consecutive days, losing about 6%, then stabilizing in a trading range wide around $1.

    Volumes have increased during the pull back as well as in the consolidation phase, producing an accumulation phase as shown in the graph below relating to March 27.

    Altria Group Inc. daily ( March 27 )

    (click to enlarge)

    To pick the right time to buy Altria Group the article strongly recommended waiting until the trading range in progress was completed, the accumulation phase ended, and a new positive short-term trend started. In other words a strong breakage signal of the trading range in progress was necessary.

    On April 2 the price of Altria Group opened the day with a gap up and an increase in volumes. This was the expected signal to buy at $34.50.

    Altria Group Inc. daily ( April 3 )

    (click to enlarge)

    For those people who didn't have the opportunity to buy MO at the break of the trading range, there is now a new opportunity to buy.

    Another important point of entry is given by the breakout of the relative maximum registered on March 27. In the past few days, the price was trying to break this level that is positioned around $35.50.

    More precisely, on April 9 the level was barely crossed, as shown in the chart below. However, in the days after, the price has not significantly moved away from this level.

    Altria Group Inc. daily ( April 11 )

    (click to enlarge)

    It is important to note that the break of the maximum would be a signal of significant strength to push the price up in a long-term trend.

    In this respect we note that the same level had already been touched on August 14, year 2012, marking another relative maximum, after which the price dropped until mid-November.

    Altria Group Inc. daily ( Double Max )

    (click to enlarge)

    However, as validated by two maximums, the level in the subject is very strong and therefore, to be exceeded, it requires much force and must be supported by large volumes.

    In this regard, note that some traders see the double and triple maximum as a point of inversion, so if they are already long they tend to sell in the vicinity of the triple maximum. If they are not yet on the market, they want to go short. Trader trend followers, on the contrary, will try to buy at break level.

    There will then be a battle with wounded and winners. To avoid buying at the maximum and then see the price pull back, you have to be very sure of the trend after the break.

    Rather, it would be better to enter late and, for greater security, it is recommended also a stop loss close to cope with a possible reversing.

    Disclosure: I am long MO. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

    Tags: MO, long-ideas
    Apr 14 4:33 AM | Link | Comment!
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