AA – Price Direction

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AA – Position Adjustment?

Let’s say one hypothetically had a purchase price for Alcoa Inc. (AA) at $13.5 as an appreciable portion of their portfolio. AA has not been doing so well over the past couple of months. So what action should be made? Sell off? Hold? Accumulate!? Below we’ll address AA as if it’s a part of our portfolio and decide a direction to take (hypothetically).

The technicals are all in the gutter indicating that AA is bottoming out. AA’s price is riding the lower end of its price channel. The RSI is far below 30 in the 70-30 range. MACD is not the lowest in recent history, however it is showing price bottom.

Another consideration is the open interest (OI) for AA. We chose to pick the July contract to evaluate as this expiration has the most activity surrounding it. OI is showing highest concentration above the price of $12.

Now, keep in mind that no news or fundamental analysis is taken into account for the situation at hand. The general theory of OI is that everyone has done that research. Please keep this in mind as we propose price trajectory.

Between the charting, technical, and open interest considerations, we feel that AA at a price of approximately $12.00 is a good long entry. Greater economic concerns (primarily hawkish moves from the FED, Greece Bailout) could drive price beyond what we’ve considered in this analysis.


Donchian 11.92 lower and 13.75 upper channel
RSI Below 30 (~25?)
MACD below signal line and below zero with the signal line below zero

AA - Charts _ 6.15.2015

*Charts from ThinkorSwim™

Open Interest:

Highest concentractions of OI for both PUTS and CALLS is above the current price of ~$12.00.

AA - OI _ 6.15.2015

Disclaimer: The information presented does not consider your personal investment objectives and should not be taken as a recommendation. Further, it shall not be construed as an offer to sell or a solicitation to buy any security mentioned. The risk of loss in any stock, option, or futures trade can be substantial. Consider all relevant risk factors before trading.

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