Alcoa did continue to drop as expected, but at a snails pace. Essentially it spent 8 months triangulating and going nowhere. At some point it should still trade below the $6 level. it still sports a p/e ratio of about 24 so from that metric’s point of view that is not unreasonable. Here, once again , is the big picture. The company is reporting next week.

Back in July we ventured a guess that the stock might drop to anywhere between $10 and $4. It does not look like we are there yet, even though we reached the b-wave level on the way up. Al is so often the case, nothing is perfectly clear but another, 5th way down does appear to be in the cards. The stock is already down 55% from this year’s highs.

Either they are going to build planes with balsa and sell beer in tin, or there is something odd with this stock. Here is the chart;

It is unlikely that the stock would go below the recent $4 low and accordingly I would prefer to contemplate a bullish outcome. However that does not mean that the stock cannot go sideways for a long time. With a P/E at 23 there certainly is still room for a drop, albeit probable not below $4. However if you look at it on a semi-log scale anything still looks plausible.

The semi-log scale is on the right. Clearly there still is “room” on the downside, making the notion that the move from the low is simple a 4th wave all the more plausible. Use a stop at $14 or so. By the way we did recommend the stock below $5, see below.

We did very well with this stock. Bought it at the low and sold it at $17+ for  a threefold increase. Then we forgot to look at it again which is rather unfortunate as the stock behaved in a very predictable fashion. Here are the charts;

It is by no means clear if the first or the second top was THE top. In the latter case (green) a multi-year triangle as a 4th wave fits between the two tops. In the former case (blue) the “orthodox” top is the first one with a large B-wave creating the second top. Fortunately, for the moment at least, it does not make one iota difference which interpretation is correct as in either case the big drop following should be 5 waves. Today we may have completed a 4th wave in the form of a nice A-B-C. It is still possible that the C leg could go a dollar or two higher but I doubt it. It is quite amazing that this stock added so little over the year and a bit after we sold. Perhaps it was less inclined to partake in the intoxicating punch-bowl served by the Fed, as indeed it’s ticker symbol would suggest. In any case it should go to a new low. By the way the P/E is running at about 77!