'Sneaky AI' Stock Alcoa Sees Stunning Surge and it's Time to Sell
Reversals in gold, silver, copper and aluminum are sounding a warning.
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2025 will be remembered as the year AI stocks took off. Most of the Magnificent Seven, along with newer names like Palantir (PLTR) , caught the attention of traders this year.
The past few months have been a different story. Over the past two months, the Roundhill Magnificent Seven ETF (MAGS) is basically unchanged. During that stretch, Palantir has barely moved, and AI chipmakers like Broadcom (AVGO) and Advanced Micro Devices (AMD) have also laid dormant.
A Sneaky 32% Gain
However, our sneaky AI play, 140-year-old Alcoa (AA) , has gained 32% over the past two months. Our premise was that the need for AI infrastructure, particularly data centers, could be a boon for the Pittsburgh-based aluminum giant.
To be fair, Alcoa’s recent run has little to do with AI, and more to do with skyrocketing metals prices. For example, aluminum recently hit a three-year high (arrow), driven by tight supply and increased demand.
However, aluminum futures fell by 3% on Monday. In the process, a two-candle bearish engulfing pattern formed (circled).
Metals Take a Beating
Aluminum wasn’t the only base metal that had a rough day on Monday. Copper saw a 4.5% decline as it tested its recent highs (horizontal dotted line). Just like aluminum, the red metal formed a bearish engulfing pattern (circled).
The damage wasn't contained to base metals. Precious metals were also affected. Gold suffered a 4.25% loss, with Monday’s red candle engulfing nearly a week’s worth of activity.
Silver, which has been on fire of late, suffered an 8% reversal. The bearish Japanese candle pattern on this chart is called "dark cloud cover," which means the previous candle was mostly, but not completely, engulfed. Still, it’s a bearish pattern.
Some Things Can't Be Ignored
If major reversal patterns are forming on a variety of both base and precious metals charts, it’s something that can’t be ignored.
Is this the beginning of a major reversal in metals prices? I don't know, but if that turns out to be the case, this is how such a reversal would begin.
Alcoa Hangs Tough
Imagine my surprise when I checked Alcoa’s chart, and saw the stock still hovering near an 18-month high. Alcoa has gained a stunning 29% over the past month, and is now up by 41.5% on the year.
The stock is overbought with an relative strength index (RSI) reading of 77 (point A). Any reading above 70 indicates an overbought asset.
Still Accepting Gifts
Alcoa is generally a boring stock. I wasn’t anticipating a 32% gain in two months.
When I see an unexpected Christmas present under the tree with my name on it, I open it. A 32% gain on a boring stock is a gift, and we are happy to accept it. It's time to ring the register on Alcoa.
At the time of publication, Ponsi was long AA, PLTR, AMD and AVGO.
