Signal Says Alcoa Stock Could Keep Climbing

There is plenty of pessimism that could unwind as well

Deputy Editor
May 6, 2021 at 12:21 PM
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The shares of Alcoa Corporation (NYSE:AA) are down 1.4% to trade at $40.02 at last check, pulling back from their two-year high of $41.44, touched earlier this morning. After the 100-day moving average caught AA's late-January pullback, the equity has been climbing on the charts, though it's now on track for its first daily loss in three sessions. However, there is reason to believe that the stock could resume its rally on the charts.

AA 0506

More specifically, today's peak comes amid historically low implied volatility (IV), which has been a bullish combination for Alcoa stock in the past. According to data from Schaeffer's Senior Quantitative Analyst Rocky White, there have been another two times in the past five years when the security was trading within 2% of its 52-week high, while its Schaeffer's Volatility Index (SVI) stood in the 20th percentile of its annual range or lower. This is now the case with HSY's SVI of 51%, which sits in the low second percentile of its 12-month range.

White's data shows that a month after these signals, the security was higher, averaging an 8.1% return for that time period. From its current perch, a move of similar magnitude would put AA above $43, extending its two-year high. 

There is plenty of room for upgrades amongst the brokerage bunch, too. Of the seven analysts in coverage, three carry a tepid "hold" rating on the security. Plus, the 12-month consensus price target of $38.14 is around a 4% discount to current levels.

Tailwinds could come from an unwinding of pessimism in the options pits, too. AA's 10-day put/call volume ratio at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) stands higher than 97% of readings from the past year, showing puts being picked up at a much faster-than-usual clip. 


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