How to Trade Alcoa Post-Earnings

Alcoa AA kicked off earnings season Monday, reporting a fourth-quarter loss of 18 cents per share versus a profit of 24 cents per share for the same period last year. Analysts were expecting the loss to come in at five cents per share. For more on Alcoa's earnings click here. More importantly to investors, however, is how to capitalize on the subsequent move sure to follow the earnings report. As the nine month daily chart below shows (click to enlarge), shares of Alcoa are closed Monday's session just below a downward sloping trendline (currently sitting at $9.45), which dates back to early July 2011. Should the stock manage to break (and more importantly close) above that line in Tuesday's session, look for a quick run to the nearest resistance level at $10.10 (7.2% higher than Monday's closing price), as shorts rush to cover and new investors enter. Beyond that, resistance levels to watch are $10.99 (11/04/11) and $11.63 (10/28/11). Conversely, should investors view Monday's report negatively and begin to sell, look for bears to try to push shares down to $8.50 – an area that has served as major support over the past month. If bears can indeed break that below that level, look for heightened selling to occur, which will likely be followed by a move toward the 52-week low of $8.43 (10/04/11). Trading has been mixed in the after hours session, with shares trading as high as $9.67 immediately following the release, to as low as $9.16 at 4:16pm. The stock has recovered since hitting that low, currently trading at $9.43 - marginally above the closing price.