Friday Notable Stock – AA
Alcoa, Inc. (AA)
Alcoa (AA) peaked about 13 months ago at 17.57 then ran almost straight down to half itself below 8. AA is a resource related stock so its performance has been entirely consistent with the resource and materials sector. No surprise there. The big question is whether or not AA has made a major bottom and will be a good long trade candidate in the year ahead?
Here’s a weekly chart of AA extracted from Arthur Hill’s Alcoa report at StockCharts.com.
Here is the Options Master Chartist Market Location chart for AA.
Here’s the quick read from the Location Chart: AA has a positive technical score (bullish); recent price movement is above the midline (bullish) and the Daily Technicals are net bullish. That makes AA a good long trade prospect when it starts its next Bull Rotation. Right now AA is punching into the top of the Trading Range on extreme momentum readings, and although it could expand the range and go higher, it’s probably more risk than reward to get in now on the long side. The options are pricing in a move of +/- .37 points for the week ahead ending on the last trading day of the year.
AA is the perfect stock to go long by selling a naked put in place of buying 100 shares of the stock. The benefits of selling a put are a better probability of profit (POP) and a better return on capital (ROC) because the naked put will take less buying power per 100 shares than buying the stock outright. Watch this tastytrade video on why selling puts is almost always better than buying stock outright.
Merry Christmas. Peace on earth to men of good will.
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