Alcoa Inc. (AA) shares rallied in after-hours trading after reporting a rise in profit and affirming full year aluminum demand growth of 5%. The company reported net income of $135 million, or $0.09 per share, a six cent beat of the $0.09 estimate. Revenue came in better with a $5.30 billion reading, significantly better than the $5.25 billion forecast and down 10% year-over-year. Today’s near 4% stock price gain to $10.54 in after-hours trade takes price clearly above both the 50- and 100-day SMA(s).
The company noted that on June 29, 2016, Alcoa Upstream Corporation (to be renamed Alcoa Corporation prior to separation) filed an initial Registration Statement on Form 10 with the U.S. Securities and Exchange Commission. The initial Form 10 filing is a major milestone in Alcoa’s pending separation into two strong standalone, publicly-traded companies. The ValueAdd segments (other than the rolling mill operations in Warrick, IN and Saudi Arabia) will remain in the existing company, which will be named Arconic Inc. The separation is on track to be completed in the second half of 2016.
Price action on the AA daily chart shows that the next key resistance level is the $10.70 region. It is around that area that we could see a confluence of bearish reversal patterns. For both a bearish ABCD and bearish butterfly patterns, Point D is targeted with the $10.70 to $10.90 region. If valid, we could see price target $10.00 area.
If the bullish move higher invalidates the reversal pattern, further upside may the April high of $11.50. The Trade: Buy AA at $10.00, with a stop loss at $9.65 and a take profit at $10.70. The Risk/Reward Ratio is 1:2