Is Alcoa a Buy Ahead of Earnings? (AA)

Alcoa Inc. AA is set to kick off the earnings season next week with its report after the bell, July 12th. The stock has been drifting lower, along with the overall market, over the past three months, down from $15.00 to its current trade price of $10.25. That is a sell off of nearly 32%; since its last earnings report on April 12th the stock is down 29.62%. Earnings estimates have also been coming down for the name over the past 90 days; the Street’s estimates have fallen from $0.24 per share to its current estimate of $0.14 per share. That is a 42% downward revision over that time period. The yearly Street estimates have also come in by 6.25% over the same period. Technically, Alcoa is nearing support around the $9.50-10.00 level, which is where it began its multi-month rally from back in May of 2009, when it has a disastrous quarter, losing $0.59 per share. Options action has been favoring the call side for the past month, though much of that action has been early, which is to say it was wrong. Traders should look for a good entry point into the name sometime this week as a long candidate into earnings. If a good entry point does not present itself, then traders should hope for a bad quarter and a strong sell off in the stock (on heavy volume); buying the stock and/or selling puts at that time would be a smart play.