
How to Trade Alcoa Earnings Volatility
It has long been a tradition for Alcoa (AA) - Get Report to be the first company to report quarterly earnings each calendar quarter, even though the company was removed from the Dow Jones Industrial AverageI:DJI at the close of trading back on Sept. 20, 2013. Alcoa reports earnings Monday after the closing bell.
On Monday, the first Dow component to report earnings for the quarter ending June 30 is JPMorgan Chase (JPM) - Get Report , which reports before the opening bell on Thursday. And Action Alerts PLUS holding PepsiCo (PEP) - Get Report already reported quarterly results last week for the quarter ending in June.
Alcoa's earnings report is an important gauge of demand for aluminum. Analysts expect the company to earn 9 cents a share when it reports earnings. Sales of new aluminum-body automobiles and trucks have been strong, including the iconic Ford (F) - Get Report F-150 pickup truck.
Here's how to trade Alcoa based upon daily and weekly charts and key technical levels.
Here's the daily chart for Alcoa.
Courtesy of MetaStock Xenith
Alcoa closed at $9.82 on Friday, down 0.5% year to date. It is in bear market territory, 44.7% below its multiyear high of $17.75, set on Nov. 21, 2014. The stock has been a strong performer since Jan. 20, and is up 59.9% from the low of $6.14 set that day.
The daily chart shows the Fibonacci retracements from the November 2014 high to the January 2016 low. Since setting the low, the stock rebounded above its 23.6% retracement of $8.89 on Feb. 26. At its 2016 high of $11.50, the stock was between its 38.2% retracement of $10.58 and its 50% retracement of $11.95. More recent weakness had the stock testing its 23.6% retracement on May 19.
This places the earnings neutral zone between its 23.6% retracement of $8.89 and the 38.2% retracement of $10.58.
Here's the weekly chart for Alcoa.
Courtesy of MetaStock Xenith
The weekly chart shows a red line through the price bars, marking the key weekly moving average (a five-week modified moving average). The green line is the 200-week simple moving average, the "reversion to the mean." The study in red along the bottom of the chart is weekly momentum (a 12x3x3 weekly slow stochastic), which scales between 00.00 and 100.00, where readings above 80.00 indicate overbought and readings below 20.00 indicate oversold. A negative weekly chart shows the stock below its key weekly moving average, with weekly momentum declining below 80.00 in a trend toward 20.00.
The weekly chart for Alcoa is positive, with the stock above its key weekly moving average of $9.59, but below its 200-week simple moving average of $11.02. The 200-week SMA has been tested on strength twice over the last 52 weeks, during the week of Oct. 9, 2015, when the average was $11.05, and during the week of April 29, 2016, when the average was $10.97.
The weekly momentum ended last week at 29.20, up from 29.03 on July 1.
Investors looking to buy Alcoa should do so on weakness to $8.13, which is a key levels on technical charts until the end of September.
The $9.74 level should be a magnet through July.
Investors looking to reduce holdings should consider selling strength to $12.89, which is a key level on technical charts until the end of 2016.
This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.











