Shares of Arconic (ARNC) , formerly Alcoa, tumbled in 2015, breaking below the lows of 2014 and 2015 before a reversal materialized. Prices of the Action Alerts PLUS portfolio holding have been stabilizing this year, and while short-term trading has been erratic, the longer-term price action suggests that a meaningful bottom is underway for the supplier of engineered products to the aerospace and automotive markets.
Let's dig deeper.
In this one-year daily bar chart of ARNC, above, we get a mixed and sometimes confusing chart picture. Prices are fairly steady from March through September, staying above the flat to rising 200-day moving average line. Prices turn sharply lower in October and into early November, with price bounces failing at the underside of the declining 50-day moving average line.
If we only paid attention to price we would be bearish on ARNC, but the indicators suggest a different story. In the middle panel is the On-Balance-Volume (OBV) line, and it makes a higher low when prices make a lower low in November. Price momentum (lower panel) also gives us a bullish divergence, with higher momentum readings versus lower price readings. This price momentum divergence tells us that the November decline was slower than the October selloff. Momentum tends to slow into a price bottom.
In this three-year weekly chart of ARNC, above, we get a much different and bullish story. If we draw a line across the $18 mark it looks like dips to and one decline below $18 were bought. In this chart we can also see that prices are below the 40-week moving average line, but the line has a positive slope for the past four months.
Now look at the weekly OBV line. The OBV line has been rising since January and suggests aggressive buying and accumulation. In the lower panel is the trend-following Moving Average Convergence Divergence (MACD) oscillator. The MACD oscillator is below the zero line, which is bearish, but the two averages that make up the indicator are narrowing toward a possible cover-shorts buy signal.
In this Point and Figure chart of ARNC, above, we can get clear breakout and breakdown levels. A close at $25 or higher is an upside breakout and a close below $17.50 would be bearish.