A broker's ability to determine assets for profitable investing is one of the key factors when considering the consistency of its analytic department. This aspect of broker activities is getting increasingly popular since more brokers start giving their own predictions and analytic outlooks to help their clients earn more money in the long run, simultaneously helping them make more decent trading and investment decisions. Forex brokers start giving their predictions on stocks, indices and commodities without limiting themselves to currencies.
Alpari is one of such companies. Alpari is a heavyweight in the international Forex arena. It can boast one of the best analytic teams in the industry. Today, those guys will share with us some of their promising investments…
Aluminum Industry Comes To Life
According to Vladislav Antonov, an expert working for Alpari, the aluminum industry is one of the most attractive investments at this point. While metallurgy companies still cannot recover form the crisis (which led to aluminum overproduction, price collapse and shutdowns across the globe), China is still a strategical consumer of aluminum.
During the latest crisis, the minimal price was set in Feb 2009 at 1251,75 dollars per metric ton versus 3315 dollars per ton seen on July 15th, 2008. In 223 days the price dropped 62,23%! During the next 3 years the price recovered up to 2800 dollars per ton (+123,6%). In May 2011, the price started another major downtrend, which is still underway.
At this point, the retracement from the previous rally (L1251,75-H2803) is around 70%. On Friday, the London Metal Exchange closed the trading week at 1782.
It is not accidental that we mentioned the crisis and aluminum prices. According to the expert, the aluminum industry is still trying to recover from the overproduction caused by the crisis. After the LME set new rules, the price managed to consolidate above 1755.
At this point, it is beneficial to consider investing in Alcoa’s stock:
According to Wikipedia:
Alcoa Inc. (from Aluminum Company of America) is the world's third largest producer of aluminum, behind Rio Tinto Alcan and Rusal,[2] with corporate headquarters in New York City. From its operational base in Pittsburgh, Pennsylvania in the United States, Alcoa conducts operations in 31 countries. Alcoa is a major producer of primary aluminum, fabricated aluminum, and alumina combined, through its active and growing participation in all major aspects of the industry: technology, mining, refining, smelting, fabricating, and recycling.[1] Aluminum and alumina represent more than three-fourths of Alcoa’s revenue. Non-aluminum products include precision castings and aerospace and industrial fasteners. Alcoa’s products are used worldwide in aircraft, automobiles, commercial transportation, packaging, building and construction, oil and gas, defense, and industrial applications.
In May 2007 Alcoa made a US$27 billion hostile takeover bid for Alcan,[3] aiming to unite the two companies and form the world's largest aluminum producer. The takeover bid was withdrawn after Alcan announced a friendly takeover by Rio Tinto in July 2007.[4]
Among Alcoa's other businesses are fastening systems, building products (Kawneer) and Howmet Castings.[5] The sale of the packaging unit was announced on December 21, 2007[6] and closed in the first quarter of 2008.[7]
Because of lower prices, many major companies are cutting down on their production capacities. In order to reduce the production cost of aluminum, Alcoa announced shutdowns in New York and Brazil in August 2013.
Still the expert say everything is not that bad. Apparently, low prices affect aluminum companies' yields. Still, the demand for aluminum is recovering, which means the inventories are running low. When the inventories are scanty, a new bullish cycle will break out. Apparently, Alcoa's stock will follow the rally. The latest increase in the stock price (7,85 to 9,97 dollars per share) was caused by China's decision to increase the import of aluminum as well as the report for Q3 2013.
In 2012, the global consumption of aluminum was estimated at 47,4 million tons, which is 5,5% more than in 2011. The biggest increases were seen in China, India, North America and Russia.
According to the estimations made by one of the biggest aluminum producers in the world, the global consumption of aluminum will reach 5- million tons (+5,5%). China, India and other Asian countries are expected to show the biggest increases once again.
According to Leonid Matveev, another expert working for Alpari, multiple reports indicate higher orders for aluminum made by major Japanese and European companies, including Mitsui, Furukawa-Sky, Sumitomo, KobeSteel, Hydro. This gives us to understand that the industry is gradually coming to life.
The experts say that the demand is growing by 5,5-6% a year and is destined to outpace the supply at some point in the near future. Apparently, the deficit will drive aluminum prices to new highs. The stocks of aluminum producers will certainly follow the overall bullish tendency. The producers say the fair price for aluminum in 2014 is somewhere around 2500-2600 dollars per metric ton.
The experts say that aluminum prices are currently hitting the bottom and are about to reverse in the near future. As the global economy recovers, the demand for aluminum will grow at a much faster pace. This means there is a perfect opportunity to buy a structured product that includes Alcoa's stock at a discount and to earn money on the forthcoming growth.
The monthly chart above is reflecting the dynamics shown by Alcoa's stock since the beginning of the global financial crisis in 2008. Still, the decline started in 2007 (from 44,77 dollars per share). During the first stage of the crisis, the stock depreciated by 89,81%. At this point, the price is still flattish. For 518 days, the price has been fluctuating in a relatively narrow rage (some 2,3 dollars wide). In July, the price stayed around 7.63. At this point, the price is close to the top of the range around 9,24.
It is recommended to purchase the structured product on Alcoa's stock with 100% safety of funds. If the scenario fails to manifest itself, you will get back 100% of your investment. This is probably one of the best investment offers ever made!
Please, pay attention to the fact that if to built a sloping channel trough the lows at 4,97-7,97 and the highs at 17,60-18,47, we may expect a rally within the next 396 days (since July 1st, 2013). If this is the case, the price may reach the top of border of the sloping channel at 20,24 dollars per share. There are 3 intermediary resistances on its way - 11,36, 15,31 and 18,55. Still, this is the most optimistic and more prolonged scenario.
However, if within the next 2 months the price breaks above 11,36 (Fibo-level 14,6%), the monthly chart will show us how the price is developing a «double bottom». Therefore, Alcoa's stock is currently a bargain!
