Alcoa Inc (NYSE:AA) has gone from $7.70 to its recent 52 week high of $14.00 in less than one year. This run was on the back of hopes for a stronger global economy. That dream is fading and with it the stock price of Alcoa Inc is set to drop sharply. If you look at everything about the global recovery, you come back with question marks. Where is it? China is slowing, Europe is in shambles, economic sanctions are on Russia and the United States just reported GDP at 0.1% for the first quarter of 2014. As if that was not enough to put a major overvaluation on Alcoa Inc, the Federal Reserve is pulling liquidity out of the system at a $10 billion monthly clip. The balance sheet of Alcoa Inc is also troublesome. They have almost $8 billion in debt and are barely turning a profit. Their whole future rests in the hands of the global economy and after a five year recovery that was mediocre at best, the next recession is not far away.
Alcoa Inc (NYSE:AA) is in trouble based on its current stock price. There is no reason why the stock should be trading where it is. Look for a 20% pull back in the coming months. A likely target would be $10.85 for Alcoa Inc.