During the recent trading sessions stock of Alcoa Corporation (NYSE:AA) was gathering the crowd in the stock market. It is widely believed that a stock’s future performance can best be predicted by analyzing prior trends and patterns in price. In the case of AA, the chart has some interesting things to say about where the stock might be headed in the future.
How has the stock performed recently?
Alcoa Corporation (NYSE:AA) in the last month has increased +4.52%. Shares are now up over the past year, outperforming the broad market by -100% and outperformed a peer group of similar companies by 241%. After the latest session, which saw the stock close at a price of $46.94, AA sits below its 52-week high. Alcoa Corporation (NYSE:AA) has been trading in a bullish manner, based on the relative positions of the stock’s 20 and 200 day moving averages.
Of course, these surface-level price movements don’t tell us much about the direction that AA may be headed in the future. To do this, analysts often study the speed and magnitude of a stock’s price movements with what are known as momentum indicators. The logic is that as a stock’s momentum slows, it may be nearing key support or resistance levels and possibly the end of a current trend. Two such indicators are the RSI (Relative Strength Index) and the Stochastic %k Oscillator, which fluctuate on a scale of 0 to 100. A reading above 70 indicates that a stock is overvalued, and a reading below 30 implies that it is undervalued. The 20-day RSI for AA is 61.21%, which suggests that the stock is not particularly expensive or cheap, and not predisposed to a reactive price movement based on this measure. The 20-day Stochastic %k measure, which sits at 57.96%, tells a similar story, and suggests that AA currently trades in neutral territory.
What do the trading volumes reveal?
Volume patterns can also be useful for predicting future performance. When trading activity is abnormally high, it’s often a sign that the market feels particularly strong in one way or another about the future direction of a stock. Alcoa Corporation (AA) average trading volume of 3,924,240 during the past month is 4.93% below its average volume over the past year, indicating that investors have been less active than usual in the stock in recent times.
What do the analysts think?
AA is currently undervalued by -4.2% relative to the average 1-year price target of $49.00 taken from a group of Wall Street Analysts. The average investment recommendation on a scale of 1 to 5 (1 being a strong buy, 3 a hold, and 5 a sell) is 2.10, which implies that analysts are generally neutral in their outlook for AA over the next year.
How risky is the stock?
Absolute price performance isn’t the only thing analysts consider when predicting future performance: volatility matters as well. Beta, which measures the stock’s volatility relative to the overall market, is a simple but effective metric for assessing risk.
Alcoa Corporation (NYSE:AA) has a below average level of market risk. During the past couple of weeks, AA average daily volatility was 20.39%, which is 11.21 percentage points lower than the average volatility over the past 100 days.