Alcoa CAN Wait

With the dollar falling in 2010, the bulls have jumped back on the metals bandwagon.  Longer-term I’m still bullish on the metals as well.  A generally weaker dollar will continue to drive capital into commodity rich nations, commodities, and various metals.  The Powershares DB Base Metals (DBB) ETF still looks as if it has more room to run.  But, if we drill down into some of the companies that operate in the metals space, the story may be a little different.

Last night Alcoa (AA) announced earnings with a big fat miss.  They blamed most of their loss on some restructuring and various charges.  But, given that the stock is at the top of its 1-year range, I think investors will find any reason at all to sell Alcoa.  Longer-term, I think the company is ok but for now, I’m staying away.

The chart above shows Alcoa going back almost a year.  Based on the weak earnings report and the stock market being overbought, I think Alcoa could fall to the $15 dollar range.  There are other companies to short like the video game makers, but if you’re into shorting individual companies, the stop will go at $17.

This post published at www.karleggerss.com

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