Is Alcoa Corp (AA) a Strong Buy as Short Interest Declines and Bullish Momentum Builds?

The recent performance of Alcoa Corp (NYSE:AA) has sparked renewed interest among investors, driven by a sharp decline in short interest, positive analyst sentiment, and robust technical indicators. As the aluminum giant navigates a complex macroeconomic landscape, the interplay between market sentiment and technical momentum suggests a compelling case for a "Strong Buy" recommendation.

Short Interest Trends: A Shift in Investor Sentiment

Short interest in Alcoa has undergone significant fluctuations in late 2025. As of August 15, 2025, short interest stood at 11.49 million shares, or 4.46% of the public float, marking a 28.8% decline from the 16.13 million shares reported in July. This reduction signals a notable shift in investor sentiment toward a more bullish outlook, as short sellers typically bet on price declines. The short interest ratio (SIR), which measures the number of days it would take to cover all short positions at the average daily trading volume, is currently 2.0-a level consistent with strong positive sentiment.

However, recent data from November 2025 reveals a slight uptick in short interest to 6.94 million shares according to Finviz. While this suggests a temporary bearish tilt, the broader trend remains favorable. Short sellers often react to short-term volatility, but the sustained decline in short interest over the past quarter indicates growing confidence in Alcoa's fundamentals. Institutional investors, including Nomura Holdings Inc. and LMR Partners LLP, have also reduced their short positions, further reinforcing the narrative of improving market sentiment.

Analyst Ratings and Earnings: A Mixed but Optimistic Outlook

Analysts remain cautiously optimistic about Alcoa's prospects. As of Q3 2025, the company reported a net income of $232 million, driven by a gain on the sale of its Ma'aden joint venture interest, though this was partially offset by restructuring charges from the Kwinana refinery closure. While Q3 also saw an adjusted net loss of $6 million (EPS -$0.02) and a revenue dip to $3 billion, the stock surged 7.82% in after-hours trading, reflecting investor optimism about strategic initiatives.

Looking ahead, Wall Street analysts project a consensus price target of $40.75 for Alcoa, with 40% of ratings labeled "Strong Buy," 20% "Buy," and 30% "Hold." Long-term forecasts anticipate a 2.3% annual revenue growth rate and a 20.4% return on equity by 2028. Q4 2025 guidance is particularly encouraging, with expectations of improved Alumina segment performance and the San Ciprian smelter reaching full capacity by mid-2026. These operational upgrades, coupled with a projected EPS of $0.86 for Q4 2025, underscore Alcoa's potential to regain profitability.

Technical Analysis: A Bullish Tapestry of Indicators

Technical indicators paint a strong bullish case for Alcoa. The 14-day RSI stands at 78.96, signaling an overbought condition that often precedes a continuation of upward momentum. The stochastic oscillator (72.37) and MACD (3.46) further reinforce this trend, both suggesting a "Buy" signal.

Moving averages across multiple timeframes-5, 10, 20, 50, and 200-day-also align with a bullish bias. The stock price of $47.24 is well above its 200-day SMA of $31.90 and its 50-day SMA of $38.48. Exponential moving averages (EMAs) for the 5, 20, and 50-day periods are similarly supportive, with the 20-day EMA at $40.65. Bollinger Bands for 25- and 100-day periods also indicate a "Buy" signal, as the price remains above the upper band, reflecting strong upward momentum.

Conclusion: A Convergence of Fundamentals and Momentum

Alcoa's recent trajectory reflects a convergence of favorable market sentiment and technical strength. The decline in short interest, coupled with positive analyst ratings and a robust earnings outlook, suggests that the stock is poised for a rebound. Technically, the alignment of RSI, MACD, and moving averages provides a clear roadmap for continued upward movement. While short-term volatility-such as the November rise in short interest-may test investor resolve, the broader trend remains firmly bullish. For investors seeking exposure to a sector poised for long-term growth, Alcoa presents a compelling opportunity.