Alcoa shares slump after Q3

[MongiIG]

The drop in aluminium prices and rise in raw material costs, particularly those of energy, have conspired to hit Alcoa’s third quarter (Q3) earnings.

 Jeremy Naylor | Writer, London | Publication date: Thursday 20 October 2022

Alcoa share price slumps

As the world economy goes into a downturn as some are predicting that we could well see some Western economies go into a recession, that is two consecutive quarters of negative growth, in other words, contraction, base metal companies are finding the going increasingly tough.

Late last night, we saw a big pullback in the share price of Alcoa, the company that concentrates its efforts in the aluminum sector.

Earnings numbers

Let's take a look at the numbers that we saw out for the third quarter (Q3) last night, posting a loss of $0.33 a share. Now, analysts had expected a positive earnings result of $0.19. Revenues came in weaker as well. We'd been looking for something like a round about $3 billion in the quarter. It came in at $2.85 billion. Now the company is also lowering its 2022 shipment projections for alumina and bauxite.

Alcoa was hit by a combination of lower aluminum prices and higher energy costs.

Alcoa share price

Let's take a look at Alcoa share price.

Now, this is a chart here where you can see on the right hand side, we're testing this line of support at 3340. Yesterday we saw a 14% drop on the stock.

This big box that I've drawn here were the lows we saw on the left hand side at the beginning of the COVID lockdowns at 520. The record highs we've seen for Alcoa was at 9820. Since then we've seen this pullback.

Interestingly it is very similar to the chart of aluminum. Look at that, almost identical, aluminum bouncing off this line of support at 7640. Now if you look at where we are in aluminum, this line of 2074 below where we are at 2222, is a line of interest. And if we do get a break of that, then you are on to a total retracement whihc will go down at 1455. I suspect that line could well hold up.

Just quickly going back to Alcoa, how you trade this at the moment in extended trade on the IG platform. Not much move on the session early doors on this Thursday morning trade. Pretty much cementing in that big drop that we saw yesterday.

But this line at 3340 is an interesting line. But if we do get a break of that, the next line of support is at 2715.2, which is the 76.4% retracement of this big move here.

So holding on to yesterday's gains, it'll be interesting to see where Alcoa moves in the next few days.