Alcoa hitting downward sloped trend line and gets a bearish signal
Basic materials stocks have performed relatively well in the last few weeks the sector has been in the upper half in terms of its performance versus the other 10 main sectors. The rally has allowed some companies to move up sharply and enter overbought territory. One such company is Alcoa (NYSE: AA) and it has moved up over 35% in the last three and a half weeks.
The rally has caused the stock the move in to overbought territory based on the 10-day RSI and the daily stochastic readings. It has also brought a downward sloped trend line back in to the picture. If we connect the highs from February and April, we see the trend line and now the stock hit it this past week.
After touching the trend line, the stock backed off a little and we saw the stochastic readings make a bearish crossover as a result. We also see a possible round number resistance point at the $25 level. The stock hit the level last December and that served as a temporary low for several months before finally breaking below it in May.
The stock just moved above its 50-day moving average, but it is still below its 200-day which is at $25.36. The 50-day has been below the 200-day for over a year now.
In addition to the stochastic readings making a bearish crossover, the higher Bollinger Band was broken and that suggests a price fall is expected as the ticker heads toward the middle band. According to the Tickeron Technical Analysis Overview, in 22 of 33 cases where Alcoa's price broke its higher Bollinger Band, its price dropped further during the following month. The odds of a continued downtrend are 67%.
The Tickeron Trend Prediction Engine generated a bearish signal for Alcoa on September 12. The signal shows a confidence level of 66% and it calls for a decline of at least 4% within the next month. Past predictions on Alcoa have been successful 85% of the time.
The technical picture isn’t the only thing that isn’t looking good for Alcoa. The company’s fundamental indicators are also suggesting that a reversal could be coming soon. Earnings declined by 101% in the second quarter while sales fell by 24%.
These factors contribute to the Tickeron SMR rating for Alcoa being 97, indicating weak sales and an unprofitable business model. SMR (Sales, Margin, Return on Equity) rating is based on comparative analysis of weighted Sales, Income Margin and Return on Equity values compared against S&P 500 index constituents.
Additional measurements from Tickeron show a Valuation Rating of 73 which indicates that the company is slightly overvalued in the industry, the PE Growth Rating is 93, pointing to worse than average earnings growth, and the Tickeron Profit vs. Risk Rating is 100, indicating that the returns do not compensate for the risks. Alcoa’s unstable profits reported over time resulted in significant drawdowns within the last five years. A stable profit reduces stock drawdown and volatility. The average Profit vs. Risk Rating for the industry is 90, placing this stock worse than average.
Even with all of indications from the fundamental and technical indicators, the sentiment toward Alcoa is pretty average. There are 15 analysts following the stock with eight “buy” ratings and seven “hold” ratings.
The short interest ratio is currently at 2.8 and that is right in the average range. The number of shares sold short did increase slightly in the second half of August and the current short interest sits at 9,479,500 shares. The company sees average trading volume of 3.4 million shares per day.
AA's RSI Indicator peaks and leaves overbought zone
The 10-day RSI Oscillator for AA moved out of overbought territory on April 10, 2024. This could be a sign that the stock is shifting from an upward trend to a downward trend. Traders may want to look at selling the stock or buying put options. Tickeron's A.I.dvisor looked at 28 instances where the indicator moved out of the overbought zone. In of the 28 cases the stock moved lower in the days that followed. This puts the odds of a move down at .
Technical Analysis (Indicators)
Bearish Trend Analysis
The Stochastic Oscillator may be shifting from an upward trend to a downward trend. In of 63 cases where AA's Stochastic Oscillator exited the overbought zone, the price fell further within the following month. The odds of a continued downward trend are .
The Moving Average Convergence Divergence Histogram (MACD) for AA turned negative on April 15, 2024. This could be a sign that the stock is set to turn lower in the coming weeks. Traders may want to sell the stock or buy put options. Tickeron's A.I.dvisor looked at 43 similar instances when the indicator turned negative. In of the 43 cases the stock turned lower in the days that followed. This puts the odds of success at .
Following a 3-day decline, the stock is projected to fall further. Considering past instances where AA declined for three days, the price rose further in of 62 cases within the following month. The odds of a continued downward trend are .
AA broke above its upper Bollinger Band on April 02, 2024. This could be a sign that the stock is set to drop as the stock moves back below the upper band and toward the middle band. You may want to consider selling the stock or exploring put options.
Bullish Trend Analysis
The Momentum Indicator moved above the 0 level on April 22, 2024. You may want to consider a long position or call options on AA as a result. In of 91 past instances where the momentum indicator moved above 0, the stock continued to climb. The odds of a continued upward trend are .
The 50-day moving average for AA moved above the 200-day moving average on April 04, 2024. This could be a long-term bullish signal for the stock as the stock shifts to an upward trend.
Following a 3-day Advance, the price is estimated to grow further. Considering data from situations where AA advanced for three days, in of 277 cases, the price rose further within the following month. The odds of a continued upward trend are .
The Aroon Indicator entered an Uptrend today. In of 211 cases where AA Aroon's Indicator entered an Uptrend, the price rose further within the following month. The odds of a continued Uptrend are .
Fundamental Analysis (Ratings)
The Tickeron Valuation Rating of (best 1 - 100 worst) indicates that the company is seriously undervalued in the industry. This rating compares market capitalization estimated by our proprietary formula with the current market capitalization. This rating is based on the following metrics, as compared to industry averages: P/B Ratio (1.634) is normal, around the industry mean (2.254). AA has a moderately low P/E Ratio (0.000) as compared to the industry average of (24.182). Dividend Yield (0.011) settles around the average of (0.035) among similar stocks. P/S Ratio (0.619) is also within normal values, averaging (834.006).
The Tickeron Price Growth Rating for this company is (best 1 - 100 worst), indicating steady price growth. AA’s price grows at a higher rate over the last 12 months as compared to S&P 500 index constituents.
The Tickeron Profit vs. Risk Rating rating for this company is (best 1 - 100 worst), indicating that the returns do not compensate for the risks. AA’s unstable profits reported over time resulted in significant Drawdowns within these last five years. A stable profit reduces stock drawdown and volatility. The average Profit vs. Risk Rating rating for the industry is 78, placing this stock worse than average.
The Tickeron PE Growth Rating for this company is (best 1 - 100 worst), pointing to worse than average earnings growth. The PE Growth rating is based on a comparative analysis of stock PE ratio increase over the last 12 months compared against S&P 500 index constituents.
The Tickeron SMR rating for this company is (best 1 - 100 worst), indicating weak sales and an unprofitable business model. SMR (Sales, Margin, Return on Equity) rating is based on comparative analysis of weighted Sales, Income Margin and Return on Equity values compared against S&P 500 index constituents. The weighted SMR value is a proprietary formula developed by Tickeron and represents an overall profitability measure for a stock.
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General Information
a miner of bauxite and aluminum
Industry Aluminum