Q2 STOCKS TO BUY

Technical Alarm Sounding Ahead of Alcoa Earnings

Alcoa will report earnings after next Wednesday's close

Jan 11, 2019 at 12:34 PM
facebook X logo linkedin


It's been a volatile stretch for Alcoa Corp (NYSE:AA) stock, per its 60-day historical volatility of 53.9%, which registers in the 97th annual percentile. The options market is expecting this wild price action to continue after the aluminum giant reports fourth-quarter earnings after the market closes next Wednesday, Jan. 16.

Specifically, Trade-Alert places Alcoa's implied earnings deviation at 9%, much higher than the 5.4% next-day move the stock has averaged over the last two years. Four of those earnings reactions were positive, and four negative, but just two -- a 13.3% plunge last July and a 9.5% pop in April 2017 -- were large enough to match or exceed what's being priced in this time around.

Options traders have been loading up on long calls ahead of the event. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), AA's 10-day call/put volume ratio of 17.81 ranks in the 98th annual percentile, meaning calls have been bought to open relative to puts at a faster-than-usual clip.

Drilling down, the February 30 call has seen the biggest increase in open interest over the last 10 days, with nearly 11,600 new positions initiated. Data points to mostly buy-to-open activity, too, as speculators eye a breakout above $30 by February options expiration.

This optimism is seen in the brokerage bunch, too, with nine of 11 analysts maintaining a "buy" or better rating, and not one "sell" on the books. Plus, the average 12-month price target sits all the way up at $49.93. And while J.P. Morgan Securities slashed its AA price target to $57 from $79 earlier today, this new target is still double current trading levels.

Looking at the charts, AA stock is down almost 55% from its April 19 record high of $62.35, and hit a two-year low of $25.01 on Dec. 26 -- off 2.4% today at $28.28. A rebound off this bottom has since stalled out in the $29-$30 region, which coincides with the equity's early December bear gap close and 40-day moving average -- the latter of which could signal more troubles ahead.

According to Schaeffer's Senior Quantitative Analyst Rocky White, there have been nine other times the shares have come within one standard deviation of this trendline following a significant stretch below it. One month after this signal, AA stock was down 4%, on average, with 78% of those returns negative.

alcoa stock daily chart jan 11

 
 

Which of These SUB-$5 Stocks Could 26x From Here? (AD)

He called a rare 11x on Tesla…

Then he called a 26x on Workhorse…

Then an even rarer 35x on Nio Inc…

Now Tim Bohen says these 5 tiny “America First” stocks are next up in 2025.

They’re trading for less than $5 right now.

But thanks to Elon & Trump’s new alliance…

They could be off to the races in Trump’s first 100 days.

And right now for a limited time…

You can get the names & tickers for just $1 here. (AD)

GRAND SLAM COUNTDOWN

 
 

Featured Articles from Trusted Partners:

🚀 One Stock Pick Could Change Everything in 2025
What if one stock pick could define your success next year? Get 10 expert-vetted stocks set for 2025—plus 5 bonus picks to watch now. Get the Report →

🆕 New Options Need New Trading Strategies
Zero-DTE options are the newest (and hottest) options to trade.  Professional traders have rushed into the market and are making a mint.  Don’t get left behind - learn all about these options, how to trade them, market setups to profit from, plus much more. Download now →

👀 Revealed: 3 Defensive Stocks for Your Portfolio
Worried about the market? This free report reveals 3 under-the-radar defensive stocks for uncertain times in any kind of economy.

 

 
 

FREE Report Download

 

Follow us on X, Follow us on Twitter