Schaeffer's Trading Floor Blog

Analyst Downgrades: AK Steel Holding Corporation, United States Steel Corporation, and Alcoa Inc

Analysts downwardly revised their ratings on AKS, X, and AA

by 7/3/2013 9:17 AM
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Analysts are weighing in today on steel producers AK Steel Holding Corporation (NYSE:AKS) and United States Steel Corporation (NYSE:X), as well as aluminum miner Alcoa Inc (NYSE:AA). Here's a quick roundup of today's bearish brokerage notes.

  • AKS -- which has shed more than 49% during the past 12 months to hover at $3.07 -- was slapped with a price-target cut to $3 from $6 at Nomura this morning. Elsewhere, data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) shows a 10-day put/call volume ratio of 1.85 for AK Steel Holding Corporation, conveying puts bought to open have nearly doubled calls during the last couple of weeks. This ratio ranks higher than 97% of other such readings taken within the past year, meaning speculators have rarely picked up puts over calls at a quicker pace in recent weeks.

  • Also on Nomura's radar today was X, as the brokerage firm trimmed its price target for the equity to $18 from $20. United States Steel Corporation has declined more than 19% so far this year to trade at $19.25, yet short-term speculators continue to favor calls over puts. In fact, the security's Schaeffer's put/call open interest ratio (SOIR) of 1.01 is docked in the 17th percentile of its annual range. Or, in simpler terms, near-term options players have rarely been more call-focused toward the stock during the past 12 months. This heavy accumulation of bullish bets -- particularly within the July series of options -- could end up translating into options-related resistance down the road.

  • As AA prepares to report quarterly earnings after the close on July 8, the security was downgraded to "neutral" from "overweight" at J.P. Morgan Securities ahead of the open. Alcoa Inc has lost more than 12% on a year-over-year basis to explore the $7.80 area, while also trailing the broader S&P 500 Index (SPX) by close to 10 percentage points during the past three months. Not surprisingly, skepticism has been growing toward the stock, as short interest climbed by 2.5% over the last two reporting periods. These shorted shares now make up 8.7% of the equity's float -- or nearly seven sessions' worth of pent-up buying pressure, at AA's average pace of trading.

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