By Nigam Arora & Dr. Natasha Arora

Nigam Arora answers your questions about investing in stocks, ETFs, bonds, gold and silver, oil and currencies. Have a question? Send it to Nigam Arora.

As much as we would like to answer questions individually, it is simply not practical due to the large volume. When a question is asked by several subscribers, the question is answered here.

We are fortunate to have very smart and resourceful members. Many of our members have noticed that three different famous gurus are pitching investors to buy aluminum stock Alcoa (AA).   was included in the Dow Jones Industrial Average for a long time. It was removed when the market capitalization fell too low.

The pitch is simple.

  • Russia is a major producer of aluminum.
  •  stock has been running up.
  • These gurus are trend-following gurus.

In our analysis, the logic behind these famous gurus’ calls is flawed.

  • There are huge stockpiles of aluminum in the world outside of Russia.
  • These stockpiles can last for months.
  • There are no sanctions by the U. S. or the EU on aluminum.
  • Biden administration has specifically stated that they have no plans to ban aluminum imports from Russia.
  • China is the biggest user of aluminum.
  • China is also a big exporter of aluminum products.
  • Russia can simply shift to sending more aluminum to China and China, in turn, can sell more aluminum products to the U. S. and Europe.
  • The cost of producing aluminum is going up and that is not good for AA.
  • In our analysis, demand for aluminum may be peaking. When demand peaks, prudent investors sell to the trend following the momo crowd because the momo crowd does not look ahead or do deep analysis. 
  • Ultimately momo crowd becomes the bagholder and the wealth gets transferred from the momo crowd to smart money. 

Short Signal

Yesterday, ZYX Change Method gave a signal to short sell AA. Here are the key points.

  • Since the signal  has fallen about $5 in one day.
  • If the signal was published, it would have been a nice trade.
  • The signal was not published for the following reasons.
    • Yesterday when the system was signaling a short signal on aluminum, there were already other short signals.
    • Yesterday a short signal was given on oil and that signal has proven spot on. The short sell trade on oil is nicely profitable and today a signal was given to take partial profits. For those who do not short sell, a signal was given on inverse oil ETF  and that trade is nicely profitable.
    • Yesterday a short signal was given on oil stock OXY. That trade hit the target zone the same day producing very nice profits.
    • A signal was given to short sell wheat. That trade is nicely profitable now.
    • It is important for investors to control risk.  One of the risk management techniques we use is to diversify by strategies.  
    • The three short sell signals that were given yesterday belong to the same strategy.
    • Publishing the aluminum short sell signal that belonged to the same strategy would have increased the risks.

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This post was just published on ZYX Buy Change Alert.

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Nigam Arora

Nigam Arora

Nigam Arora is known for his accurate stock market calls. Nigam is a distinguished master of the macro. He is a popular columnist with over 100 million page views, an engineer, and nuclear physicist by background. Nigam has founded two Inc. 500 fastest growing companies and has been involved in over 50 entrepreneurial ventures. He is the developer of Theory ZYX of Successful Change Management and is the author of the book on Theory ZYX, as well as the developer of the ZYX Change Method for Investing.

Dr. Natasha Arora

Dr. Natasha Arora

Dr. Natasha Arora has significant expertise in investment analysis especially biotech, healthcare, and technology. Natasha is a graduate of Harvard Medical School followed by a postdoc at MIT. She has published several peer reviewed research papers in top science journals.

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