NEW YORK (TheStreet) -- Alcoa (AA) - Get Report, the producer of aluminum and former component of Dow Jones Industrial Average, reports earnings after the close Wednesday.

For investors it's a matter of managing extreme volatility. Alcoa became a former Dow stock at the close of business back on Sept. 20, 2013, with a close of $8.20. The stock had an extremely strong momentum run-up of 114% to a post-Dow intraday high of $17.75 set on Nov. 21, 2014. Since then, the stock has been taken to the woodshed trading as low as $10.58 on Tuesday, down 40% from the high.

Given this volatility, to be shown on the daily and weekly graphs below, investors should study the technicals and use key levels if they wish to add to positions or start a new holding. Investors need to decide whether or not the current slide in Alcoa's share price factors in any potential negative earnings surprises.

Analysts expect Alcoa to earn 23 cents a share for the quarter ended on June 30. Some say that an aluminum glut, falling prices and sliding stocks in China could hurt earnings more than expected. Another key for investors is remembering that if the stock gaps below $10 a share many equity funds managers will be forced to liquidate holdings.

Here's the daily chart for Alcoa.


Courtesy of MetaStock Xenith

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Alcoa had a close of $11.06 on Tuesday, down 30% year to date and up 4.5% from the day's low of $10.58. At the lower left side of the daily graph the stock was below its 200-day simple moving average of $8.41 when it was removed from the Dow 30 at $8.28.

Once Alcoa had a close above its 200-day on Oct. 14, 2013, it was off to the races. At the middle of the chart pattern the strong upward momentum began to slow down. The stock began to consolidate after trading as high as $17.22 on July 23, 2014. Choppy volatility took the stock to a test of its 200-day simple moving average when it was $13.94 on Oct. 15. This successful test was the technical reason for strength to the multiyear intraday high of $17.75 on Nov. 21.

Shares of Alcoa then traded down and back and forth around its 200-day between $15.01 on Dec. 12 and $15.72 on Feb. 20. The stock has been below the 200-day since Feb. 25 when the 50-day simple moving average crossed below the 200-day in what technicians call a "death cross." The stock is currently below the 50-day and 200-day simple moving averages of $12.60 and $14.64, respectively.

Here's the weekly chart for Alcoa.


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The weekly chart for Alcoa is negative but oversold with the stock well below its key weekly moving average of $12.01. The weekly momentum reading is projected to rise to 6.86 this week from 6.48 on July 2. Both readings are well below the oversold threshold of 20.00. The stock began the week opening below its 200-week simple moving average of $11.09 which was tested at the high Monday and Tuesday. This is a favorable development as the 200-week is considered the stock's longer-term reversion to the mean.

The bottom line is that a break below $10 in reaction to earnings is negative whereas a move above the 200-week of $11.09 would be positive.

Investors looking to buy Alcoa should place a good till canceled limit order to buy the stock if it drops to $10.46, which is a key level on technical charts until the end of this week.

Investors not familiar with technical analysis should begin with the notion that a price chart for a stock shows a road map of past price performance, which provides guidance for predicting future share price direction.

Here's how to read a daily chart. There are two moving averages to follow; the 50-day simple moving average is in blue while the 200-day simple moving average is in green.

Here's how to read a weekly chart. The red line tracks the ups and downs of the key weekly moving average. The green line is the 200-week simple moving average. The red line that oscillates along the bottom of the chart is the momentum reading on a scale of 00.00 to 100.00. A reading below 20.00 is oversold and a reading above 80.00 is overbought.

A technically positive weekly chart occurs when a stock ends a week above its key weekly moving average with the momentum reading rising above 20.00.

A technically negative weekly chart occurs when a stock ends a week below its key weekly moving average with the momentum reading declining below 80.00.

This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.