We opened a new bearish trade on Alcoa Inc (NYSE:AA). Alcoa was downgraded recently, which makes sense considering the pressure we are likely to see on commodity stocks following the recent dismal Chinese import numbers.

Alcoa reported earnings last month and took a bit of a beating following its report. However, higher gas and oil prices helped to drive the stock back up until last Friday.

The issue is that global commodity demand isn’t really improving. It’s likely that oil production numbers will come down, but can they come down enough to add another 20% to oil prices after the rally over the last couple of weeks? We don’t think so.

Alcoa is indirectly influenced by the price of oil and gas. Demand for aluminum from automakers rises when gasoline prices are higher. However, gas prices have partially been rising because of the ongoing labor dispute. We feel that this effect has been fully priced-in, which would lead to a big drop if the strike looks more likely to resolve in the near term. Those signs haven’t appeared yet, but we expect that to occur in the short term, which is why we are recommending a new entry now on a confirmed bearish “harami” pattern at resistance.

Buy to open the Alcoa March 15 Puts (AA150320P00015000) for a maximum price of $0.45.

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