Alcoa Inc (NYSE:AA) had one of its rare positive days yesterday, ending the session with a gain of just over 2%. The volume at 16 million against the average volume of 30 million was not encouraging at all. If there is anything the bulls can be a little hopeful about, it would be the decline in bearish momentum in the last few sessions as the steepness or the angle of the fall has markedly decreased.
Alcoa Inc (NYSE:AA) has lost nearly 23% in the last 2 months but the interest of the analysts has not evaporated yet. Paul Massoud at Stifel Nicolaus hasn’t changed his stance from the earlier “buy” rating and keeps a target of $20, over 50% gain. Zacks reiterated “hold” with a price target of $17. Earlier in the month, Nomura had a “buy” rating too with a much higher target of $23 and Citigroup had set the target at $20.
Just a single glance at the price action over the last few months make it difficult to share the enthusiasm of the analysts as the stock keeps falling with no sign of any bottom. The company is closing 74000 metric tons of capacity or 21% of its full capacity, at its Sao Luis smelter in Brazil but even that can’t assure total protection against the increasing costs and falling metal prices. The company expects the first quarter restructuring cost to come around $10-$15 million or about 1 cent per share.
The true technical picture comes out of only the really larger time frame and that picture is bleak. The chart clearly shows the very strong long term supply area around $18-$19, which can and most probably will push the price to $10 levels, if not lower. Most of 2014 was spent in creating a huge contracting top and the breakdown from that congestion was ferocious. Investors may use any rally to exit the stock.