4 Trade Ideas for Alcoa: Bonus Idea

Here is your Bonus Idea with links to the full Top Ten:

Alcoa, $AA, is breaking short term resistance to the upside as it comes into the week. It touched the 78.6% retracement of the drop from the 2018 high to the pandemic low Friday and then saw some profit taking. The RSI is strong in the bullish zone with the MACD crossed up and rising on the weekly chart below. The Bollinger Bands® are pointing higher and expanding. There is resistance at 51 and 54.75 then 57 and 60 before 62.35. Support lower comes at 47.75 and 45 then 40.50. Short interest is moderate at 6.7%. The stock does not pay a dividend.

The company is expected to report earnings next on October 12th. The September options chain shows largest open interest this week at the 50 call and then the 45 call with the 45 put and 55 call next. In the October chain open interest is biggest on the put side at the 38 strike then the 40. On the call side it is spread from 40 to 60. November options show the biggest open interest at the 45 and 37 strikes on the put side, and the 55 and 60 strikes on the call side.

Alcoa, Ticker: $AA

Trade Idea 1: Buy the stock on a move over 50.50 with a stop at 46.50.

Trade Idea 2: Buy the stock on a move over 50.50 and add an October 46/40 Put Spread ($1.50) while selling the November 65 call ($1.00).

Trade Idea 3: Buy the October/November 55 Call Calendar ($1.30) while selling the October 43 Put ($1.00).

Trade Idea 4: Buy the November 43/55/65 Call Spread Risk Reversal (10 cent credit).

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After reviewing over 1,000 charts, I have found some good setups for the week. These were selected and should be viewed in the context of the broad Market Macro picture reviewed Friday which heading into the September Options Expiration week, saw equity markets have started what has been there monthly pre-expiry pullback for the 5th month in a row.

Elsewhere look for Gold to consolidate while Crude Oil also spends time moving sideways. The US Dollar Index continues in an intermediate term consolidation while US Treasuries consolidate at the retest of the 2019 highs. The Shanghai Composite looks to be breaking out of a long term broad consolidation to the upside while Emerging Markets consolidate in a short term bull flag.

The Volatility Index looks to be creeping higher making the path harder for equity markets to the upside. Their charts remain strong, especially on the longer timeframe for the SPY and QQQ with the IWM in the long term consolidation. On the shorter timeframe the SPY the IWM and the QQQ look to see an easier path to the downside short term. Use this information as you prepare for the coming week and trad’em well.


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The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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