A key level of resistance has formed in the chart of Alcoa Corp. (AA). If this level is surpassed, a breakout could occur.
AA is a vertically integrated aluminum company whose operations include bauxite mining, alumina refining, and the manufacture of primary aluminum. It is the world’s largest bauxite miner and alumina refiner by production volume, and its profits are closely tied to prevailing commodity prices along the aluminum supply chain.
The company reported earnings last month and both earnings and revenue came in ahead of forecasts, but were down year over year. AA has struggled during pandemic, which has led to a decline in industrial production. This has resulted in a fall in demand for aluminum and other metals. Management expects its aluminum business to drop in the current quarter due to higher energy costs and a change of mix in customer shipments.
The company generated $84 million in free cash flow during the quarter and raised $750 million in new debt, giving AA a cash balance of $1.7 billion. Long-term debt was $2.5 billion at the end of the quarter.
AA has had negative growth over the past three years, but analysts expect some sales growth next year. The company has a pretty low Price/Sales ratio of 0.3, well below the S&P 500’s 2.7. The stock has shown strong near and mid-term momentum, but is down more than 27% for the year. This has led to a “Neutral” rating in our POWR Ratings system.
Take a look at the 1-year chart of AA below with my added notations:
During the past few months, AA has formed a key level of resistance at the $16 (red) mark. The stock has tested that $16 level three different times since the beginning of August, and a solid close above that price should lead to higher prices for AA. A long trade could be entered on a breakthrough of that level.
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AA shares rose $0.18 (+1.15%) in premarket trading Friday. Year-to-date, AA has declined -26.64%, versus a 12.00% rise in the benchmark S&P 500 index during the same period.
About the Author: christian
Christian is an expert stock market coach at the Adam Mesh Trading Group who has mentored more than 4,000 traders and investors. He is a professional technical analyst that is a certified Chartered Market Technician (CMT), which is a designation awarded by the CMT Association. Christian is also the author of the daily online newsletter Todays Big Stock. More...
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| Ticker | POWR Rating | Industry Rank | Rank in Industry |
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