Trendsharks

Alcoa: Chance for a Bearish Reversal

Short
NYSE:AA   Alcoa Corporation
A confluence of bearish indications

Alcoa's share price is currently probing the psychologically significant resistance level at 40 .00, which serves as the upper boundary of a major accumulation range. The latter's lower end is represented by the support level at 17.00.

Breaking higher would prove quite difficult for the share price due to the massive selling pressure that is to be found just past the upper end of the range.

Despite the fact that Alcoa shares have been on the rise over the past 4 months, the continuation of the rally will find strong opposition around the major turning point at 40 .00. The resistance is currently being crossed by the descending trend line (in red), which increases the likelihood of a bearish rebound occurring from the current level. Moreover, the 300-day MA (n purple) and the 200-day MA (in orange) are also advancing parallel to the resistance level , making it even less likely for the rally to continue uninterrupted. However, that is not to say that potential fakeouts to the 45.00-50.00 range are entirely impossible.

Meanwhile, the Stochastic RSI indicator is ringing the "overbought" bell as bullish bias reaches a climax. This could give bears more reasons to step up and increase the selling pressure at this swing peak, which would consequently support the emergence of a new correction.

The nearest support can be found around the 100-day MA (in blue), which can presently be found at 27. 40 . In other words, an imminent correction from the latest peak would entail a likely dropdown of more than $13 (32%) in the share price.


Alcoa's robust quarterly performance

The latest upswing was largely inspired by the strong earnings data that the mining giant posted recently. According to the findings of the earnings report for Q1:

  • Revenue grew to $2.87 billion, up from the $2.38 billion from one year ago
  • EPS ( earnings per share) grew to $0.79, far surpassing the negative $0.23 EPS that were posted for the same period last year

Even still, the market has already had more than two weeks to price in this performance, and the "market excitement" factor that drove the hike is thus likely to start waning down soon.
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