What’s Behind 14% Rise In Alcoa Stock In A Week?

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Alcoa stock (NYSE: AA) jumped an impressive 14% in the last one week (five trading days) and currently trades at a little less than $36 per share. The stock completely outperformed the market (S&P 500) which went up only 1.5% during this time. The recent rally was driven by strong Q1 2021 results. Alcoa’s Q1 2021 revenue and earnings have been the highest since 2018. It recorded revenue of $2,870 million in Q1 2021, reflecting a rise of 21% y-o-y. This was driven by higher prices and strong shipment growth. Net income more than doubled to $175 million, while EPS also increased by the same rate to $0.93 in Q1 2021. Alcoa also stated that it has signed agreements to repower Portland Aluminum smelter in the State of Victoria in Australia. Additionally, aluminum prices have remained strong over recent months and have, in fact, gone up 3% last week. Prices are likely to remain elevated over the next two years driven by higher demand. Higher aluminum price realization has led to expectations of improvement in Alcoa’s free cash flow, which the company is likely to use for deleveraging. Thus, expectations of improvement in fundamentals (proof of which is the strong Q1 2021 performance), stronger balance sheet and overall positive sentiment with respect to global aluminum prices, have led to a surge in Alcoa’s stock price over the last week.

However, is Alcoa stock set to continue its upward trajectory or could we expect some correction? We believe that there is a strong chance (more than 60% chance) of further rise in Alcoa stock over the next month (twenty-one trading days) based on our machine learning analysis of trends in the stock price over the last ten years. See our analysis on Alcoa Stock Chances Of Rise for more details.

Five Day: AA 14%, vs. S&P500 1.5%; Outperformed market

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  6. Aluminum Price Nearing $3,000 – What’s The Impact On Alcoa Stock?

(3% likelihood event)

  • Alcoa stock rose 14% over a five-day trading period ending 4/16/2021, compared to the broader market (S&P500) rise of 1.5%
  • A change of 14% or more over five trading days is a 3% likelihood event, which has occurred 81 times out of 2516 in the last ten years

Ten Days: AA 11%, vs. S&P500 4.3%; Outperformed market

(11% likelihood event)

  • Alcoa stock rose 11% over the last ten trading days (two weeks), compared to broader market (S&P500) rise of 4.3%
  • A change of 11% or more over ten trading days is a 11% likelihood event, which has occurred 280 times out of 2511 in the last ten years

Twenty-One Days: AA 12%, vs. S&P500 5.5%; Outperformed market

(16% likelihood event)

  • Alcoa stock rose 12% the last 21 trading days (one month), compared to broader market (S&P500) rise of 5.5%
  • A change of 12% or more over 21 trading days is a 16% likelihood event, which has occurred 398 times out of 2500 in the last ten years

Out of 79 instances in the last ten years that Alcoa (AA) stock saw a five-day rise of 14% or more, 49 of them resulted in AA stock rising over the subsequent one-month period (21 trading days). This historical pattern reflects 49 out of 79, or about 62% chance of gain in AA stock over the coming month

While Alcoa stock may have moved, 2020 has created many pricing discontinuities which can offer attractive trading opportunities. For example, you’ll be surprised how the stock valuation for Compass Minerals vs Southwest Gas shows a disconnect with their relative operational growth. You can find many such discontinuous pairs here.

 

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