$AA Alcoa Corp – November 22nd, 2021

 Bullish – AA – $47.60

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Market Outlook:

Performance in equities is showing signs of narrowing to the higher weighted mega-cap names as we start to see the Nasdaq-100 outperform the S&P 500 as well as small caps. Should this continue, it may indicate an unhealthy rally in equities with limited participation. The Nasdaq-100 broke to new all-time highs on Friday while the S&P 500 got rejected once again at the $470 level. We have also noticed more volatility in bonds and rates which are showing signs of further consolidation as markets continue to price in macro data in anticipation for the projected interest rate hikes. Despite the somewhat higher rate environment, higher beta growth stocks extend their outperformance relative to value stocks and this is expected to continue this week. 

AA Bullish Trade Idea:
Our bullish trade idea today is Alcoa Corp (AA). AA engages in the mining and production of aluminum products and has a large exposure to aluminum prices. Overall, the fundamentals for aluminum are strong with the ongoing recovery creating a growing demand. Looking at AA’s fundamentals, the balance sheet improvement has been impressive. AA has strong potential to generate free cash flow through increasing prices as well as cost optimization efforts. From a technical point of view, AA has been on a long-term bullish trend with price action shifting more neutral in recent weeks. Price has pulled back to an area of support which provides a good bullish credit spread opportunity. With a technical score of 10 (out of 10), AA is a very strong stock that will likely continue higher. 

As this is a credit spread, look to take profits at 50% gain and cut losses at 100%:

  • Take Profit: $0.99 Debit
  • Stop Loss: $3.94 Debit

View AA Trade

Market Observations

  • SBUX – Price has struggled to break above the $113 minor resistance level and declined nearly 2% on Friday. This indicates a good shorting opportunity with he next support level at $105. 
  • FSLR – Pulled back from all time highs to an area of support and bounced higher with strong momentum. Look for continuation of long term rally. 
  • FB – After breaking above the $343 resistance level, price pulled back and bounced higher. Outlook remains bullish if the $343 level holds. 
Tony Zhang