2 Commodity Stocks Cut in Half

AA and CRZO still have the confidence of analysts though

Managing Editor
May 22, 2019 at 12:15 PM
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It's high time we check in on two commodity stocks that have struggled mightily the last 12 months. In fact, aluminum concern Alcoa Corp (NYSE:AA) and energy name Carrizo Oil & Gas Inc (NASDAQ:CRZO) have landed on Schaeffer's Senior Quantitative Analyst Rocky White's list of stocks with a -50% year-over-year return.

At last check, Alcoa stock was down 2.3% to trade at $24.25 today. Breakouts in March and April were stymied by the shares' 100-day moving average, and AA is dangerously close to yesterday's two-and-a-half year low of $23.85. 

Daily Stock Chart AA

Despite the equity's struggles, analyst sentiment remains overtly optimistic. Exactly seven out of the eight brokerages in coverage rate AA a "buy" or better, with zero "sells" on the books. Plus, the consensus 12-month price target of $35.69 is a 46.4% premium to its current perch.

Options look to be an ideal vehicle to bet on AA at the moment, with the security's Schaeffer's Volatility Index (SVI) of 36% ranking in the 10th percentile of its annual range. This indicates short-term options are currently pricing in relatively low volatility expectations -- a boon to potential premium buyers.

Looking at Carrizo, the stock was down 3% to trade at $12.53 at last check. While the shares have reclaimed their 50-day moving average this week, they are still down 52% year-over-year. For most of 2019, CRZO has traded in a tight range, with the $14 level looming overhead, the area of its 2018 lows. 

Daily Chart CRZO

Analysts are also keeping the faith in the oil stock, with 11 out of 19 in coverage doling out a "buy" or better rating. CRZO's consensus 12-month price target sits up at $18.94, a nearly 50% premium to its current price.

In the options pits, the security's Schaeffer’s put/call open interest ratio (SOIR) of 2.42 sits in the 100th percentile of its annual range, showing a much bigger-than-usual put-skew among near-term traders. Plus, CRZO sports a SVI of 54% that ranks in the low 19th annual percentile, revealing subdued volatility expectations at the moment.


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