Alcoa (AA) Surges 5.9% on Earnings Disappointment and Bullish Options Flow – Is This a Short-Lived Rally or a New Trend?

Summary
• Alcoa (AA) rockets 5.9% to $47.29, hitting a 52-week high of $47.4771
• Earnings miss expectations with a $6M net loss and $0.02 EPS deficit
• Options sweep on 3/20/26 $50 call shows $114.9K in premium, 36-trade execution
• RSI at 80.65 signals overbought territory, while MACD (1.96) and bullish Kline pattern suggest momentum
Alcoa’s dramatic intraday surge defies its earnings shortfall, driven by a confluence of bullish options activity and macroeconomic tailwinds in the aluminum sector. With the stock trading near its 52-week peak and technical indicators flashing strong momentum, traders are scrambling to decipher whether this is a short-term rebound or a structural shift in sentiment.

Earnings Disappointment Ignites Short-Position Covering and Options-Driven Optimism
Alcoa’s 5.9% rally defies its Q3 earnings report, which revealed a $6M net loss and $0.02 EPS shortfall. The move is best explained by aggressive short-covering and a surge in bullish options activity. The 3/20/26 $50 call sweep—split into 36 trades—indicates institutional buyers securing upside exposure ahead of March expiration. Meanwhile, the stock’s 5.7% intraday jump aligns with broader aluminum sector strength, as China’s output caps and Mexico’s import tariffs tighten supply dynamics. Despite the earnings miss, the market is pricing in a recovery narrative fueled by decarbonization demand and geopolitical trade barriers.

Aluminum Sector Gains Momentum as Mexico’s Tariffs and China’s Output Caps Tighten Supply
The aluminum sector is surging on macro-driven optimism. Mexico’s newly approved 5%-50% tariffs on steel and aluminum imports from China, South Korea, and India have intensified supply constraints, while China’s 45M-ton annual output cap and smelter delays in Indonesia further tighten global inventories. Alcoa’s 5.9% gain mirrors the sector’s broader trajectory, with LME aluminum futures rising 11.5% year-to-date. This confluence of policy-driven protectionism and production bottlenecks is creating a bullish backdrop for aluminum producers, despite Alcoa’s near-term earnings struggles.

Capitalizing on Alcoa’s Bullish Momentum: ETFs and Options for the Aggressive Trader
• 200-day average: 31.82 (well below current price)
• RSI: 80.65 (overbought)
• MACD: 1.96 (bullish crossover)
• Bollinger Bands: 46.65 (upper) vs. 33.94 (lower) – price near upper band
• Gamma: 0.1239 (high sensitivity to price moves)
• Theta: -0.1503 (rapid time decay)
Alcoa’s technicals scream short-term momentum, with RSI in overbought territory and MACD above signal line. The stock is trading near its 52-week high, supported by a 9.73 P/E ratio and strong order flow. For aggressive traders, the AA20251219C47.5 and AA20251219C48 call options offer compelling leverage. Both contracts exhibit high gamma (0.1239–0.1224) and theta (-0.15–0.14), ideal for capitalizing on rapid price swings. The 47.5 strike (code: AA20251219C47.5) has a 43.3% implied volatility and 38.8% leverage ratio, while the 48 strike (code: AA20251219C48) offers 43.28% IV and 47.33% leverage. A 5% upside move to $49.65 would yield a 190% payoff on the 47.5 call and 257% on the 48 call. These options are liquid (turnover: $212,710 and $15,377) and well-positioned to benefit from continued short-covering and sector rotation. Aggressive bulls should target a $49.50 breakout for confirmation, with a stop-loss below $44.50 to protect gains.

Backtest Alcoa Stock Performance
The backtest of AA's performance after an intraday increase of 6% from 2022 to now shows mixed results. While the 3-Day, 10-Day, and 30-Day win rates are relatively high, indicating a higher probability of positive returns in the short term, the overall return over the 30-Day period is only 0.20%, with a maximum return of 0.33% during the backtest period. This suggests that while there is a good chance of capturing short-term gains, the overall impact of the 6% intraday surge on long-term performance is modest.

Alcoa’s Rally Gains Legs – Watch for $49.50 Breakout to Confirm New Bullish Trend
Alcoa’s 5.9% surge is a textbook short-term reversal, driven by earnings-driven short-covering and bullish options positioning. The stock’s proximity to its 52-week high and strong technicals suggest a potential breakout above $49.50 could cement a new uptrend. Traders should monitor the 47.5 and 48 call options for liquidity and directional bias, while keeping an eye on the broader aluminum sector’s response to Mexico’s tariffs and China’s output constraints. With Rio Tinto (RIO) up 0.85% as a sector leader, the path of least resistance for AA appears to be higher. A close above $49.50 would validate the bullish case, while a retest of the $44.50 support level could trigger a pullback. Position sizing should reflect the stock’s high volatility and leveraged options exposure.