Underperforming Alcoa Stock Sinks Lower on Downgrade

AA call buyers have been active over the past two weeks

by Emma Duncan

Published on Apr 2, 2019 at 9:52 AM
Updated on Jun 24, 2020 at 10:16 AM

Aluminum concern Alcoa Corp (NYSE:AA) is starting its day in the red, last seen 1.9% lower at $28.91. This pullback for AA comes after Credit Suisse handed out a downgrade to "neutral" from "outperform," and a price-target cut to $31 from $40. Alcoa stock also saw an unimpressive price-target hike of $1 to $36 out of Jefferies.

On the charts, AA has been relatively stagnant of late. Despite breakout attempts following the stock's Dec. 26 two-year low of $25.02, the shares have been unable to gain traction, with the $30-$31 level emerging as a ceiling of resistance.

Nevertheless, today's bear note is relatively rare for Alcoa stock. Coming into today, nine analysts sported "buy" or better ratings, compared to just two tepid "holds," leaving plenty of room for more brokerage firms to downgrade the security. Plus, the consensus 12-month price target of $39.15 represents a premium of roughly 33% to AA's current price, suggesting price-target cuts could be forthcoming.

Looking at options, data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) shows Alcoa stock with a 10-day call/put volume ratio of 8.08, ranking in the top-heavy 80th annual percentile. In other words, long calls have been preferred over puts by a bigger-than-usual margin during the last two weeks of trading. An unwinding of optimism in the options pits could also place pressure on AA stock.

 

 


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