The shares are testing a key trendline
Alcoa Corp (NYSE:AA) stock is down 1.6% today, possibly on news the company's shut down one of three potlines at an Indiana plant. However, AA has been a strong performer on the charts since the split from Arconic (ARNC) back in late 2016, more than doubling to its current perch of $47.12. What's more, the stock's recent pullback to a familiar trendline could be a buying opportunity, if history is any indicator.
Zeroing in on 2018 specifically, the shares rallied to a record high of $62.33 in mid-April following a meet-up with the 200-day moving average, thanks to news the U.S. was placing sanctions on Russia's Rusal. However, the stock subsequently pulled back on headlines that those sanctions could be eased. Now, AA is hovering near where it was trading before the Rusal news initially hit, putting it again right near its 200-day moving average.
You can see on the chart below how strong the support was from this trendline back in March and April, and the 200-day could again be poised to mark an entry point for those looking to go long on the security. Not to mention, previous support near $45 sits below, and the 14-day Relative Strength Index (RSI) for Alcoa is just above oversold territory at 33.44.
For those who may want to speculate with options, data suggests that could be a good idea. AA has a Schaeffer's Volatility Scorecard (SVS) of 91 out of 100, meaning it's shown a strong tendency to make moves bigger than the options market was expecting over the past year. Moreover, the Schaeffer's Volatility Index (SVI) currently sits at just 35%, only 8 percentage points from a 12-month low, revealing relatively low volatility expectations priced into near-term options.
As it stands now, the June 55 call is home to peak open interest, and the June 60 call is close behind. Data from the major options exchanges shows a near-even split between buy- and sell-to-open activity at the former strike, with mostly buy-to-open action at the latter. Expiration for the June series is at the close on Friday, June 15, so Alcoa shares would need to gain 16.7% in just over two weeks to surpass the $55 level.