A key level of resistance has formed in the chart of Alcoa Corporation (AA). A breakout is expected, if this level is breached.
AA is a vertically integrated aluminum company involved in every phase of aluminum production, including bauxite mining, alumina refining, and the manufacture of primary aluminum.
The company reported its latest financial results last month, and earnings and revenues came in ahead of expectations, but the company provided a weak forecast for the months ahead. AA reported a third-quarter loss of $1.17 per share with revenue of $2.37 billion. The firm has been hit hard by the coronavirus pandemic, which led to a decline in industrial production and a fall in demand for aluminum.
AA had current assets of $4.1 billion at the end of the quarter, compared with current liabilities of $2.3 billion, so the company has enough cash and assets to cover short-term liabilities. The company has a negative profit margin and return on equity.
The firm grew both earnings and revenue in its most recent quarter, but EPS is negative and revenues are not expected to grow much next year. Since earnings are negative, we can’t calculate P/E, but the company has a low Price to Sales ratio of 0.25.
AA has shown strong near and mid term momentum, but is down over 35% for the year. This has led to a “Sell” rating in our POWR Ratings system, but that may change as we take a look at the 1-year chart of AA below with the added notations:
AA has formed an important level to watch at the $14 (blue) mark. A resistance level was formed at $14 in June and July. That level was surpassed in August, then a breakout ensued. However, the momentum failed to continue and the stock fell in September. In the past month, we can see that once again $14 has become a resistance level.
A break above $14 likely means higher prices for AA. A trader could enter a long position on a break above that level with a sell-stop placed under it for protection.
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AA shares fell $0.15 (-1.08%) in premarket trading Wednesday. Year-to-date, AA has declined -38.96%, versus a 7.54% 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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