How Long Will Alcoa May Be Stuck in 'AA'?

Back on May 22 when I reviewed the charts of metals giant Alcoa AA I wrote that "... traders should continue to operate from the long side. Raise sell stops to $38. The low $60's is my price target for now." 

AA reversed its uptrend at the end of May and gave up most of its gains for the year. Let's go back to the charts to see if we can get the next move right.

In the daily bar chart of AA, below, I can see how the stock declined from late May to early August. AA broke below the 50-day average line and the 200-day moving average line. The slope of the 50-day line is now bearish. AA has bounced back in recent days and is approaching the underside of the cresting 200-day line — a classic place to anticipate a rally failure. 

The On-Balance-Volume (OBV) line stalled in June and started a decline in July telling me that sellers of AA are being more aggressive than buyers. The Moving Average Convergence Divergence (MACD) oscillator is below the zero line but has generated a cover shorts buy signal.

In the weekly Japanese candlestick chart of AA, below, I can see that the shares made a lengthy decline from early 2022 to a low in late 2023 before a trading bounce in 2024. AA is back down below the 40-week moving average line after being above it for four months. 

The weekly OBV line has turned weak in the past four months. The MACD oscillator has crossed to the downside and is only slightly above the zero line.

In this daily Point and Figure chart of AA, below, I can see that the shares reached a downside price target in the $29 area.

In this weekly Point and Figure chart of AA, below, I can see that the software has generated a potential price target in the $14 area.

Bottom-line strategy: After the decline we have seen for AA this year I would look for a choppy, sideways trading range for a while before renewed declines in the months ahead.

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