Xgains4keeps Stocks Take Away and Related Content-Alcoa Inc (AA)

Alcoa Inc (AA) to buy jet-engine parts maker Firth Rixson for $2.35 billion

June 26 2014 Alcoa Inc (AA) reached a deal to buy aerospace-parts maker Firth Rixson from Oak Hill Capital Partners for $2.85 billion in cash and stock. The company said it expects Firth Rixson to add $1.6 billion in revenue and $350 million in earnings before interest, taxes, depreciation and amortization in 2016.

Alcoa Inc (AA) hopes to participate in the downstream end of the Aluminium business with this acquisition; which in itself makes sense as it can now control the processing of the metal as well as its consumption. 

Alcoa has not really moved very much since the announcement of this deal was made though a 1.65% downward correction will be quite significant for its options. Its Put-Call ratio is 0.37 indicating that there are more than double the number of open interest Calls as there are Puts as well as indicating that the options traders are bullish. The short ratio is a significant 5.30, based on Alcoa's outstanding volume of 1.17 billion shares it will take more than five trading days to cover these shares sold short.

Alcoa's 52 Week High is 15.18 (6/26/2014) and 52 Week Low is 7.63 (7/3/2013); which is a 98.95% increase during this period. So with the level of scepticism investors have towards AA in the form of its short ratio it can be said that some of them are asking questions and are sceptical in the most profound way.

The price curve for Alcoa is trending above the Simple Moving Average curve a further indication of how well AA has performed technically, but we can see why some of the investors are sceptical, the Accumulation-Distribution curve is trending very high. This could mean that investor are Accumulating more shares of Alcoa (AA) in line with the upward movement of the price. This indeed must have spooked some investors and we are equally spooked with the implication of the Accumulation-Distribution and Price curves relationship.

Ultimately it means that the shares sold short will serve as buffer for what looks like a stock that will inevitably seek to point downwards. Keep your eyes peeled on the short ratio because if it drops off Alcoa (AA) will lose its support.

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