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Trade of the Day: Allegheny Technologies Incorporated (ATI)

I last reviewed Allegheny Technologies Incorporated (NYSE:ATI), a leading specialty metals producer, on Dec. 17, 2016, with a recommendation to “Buy ATI at $17.50 with a trading target of $22 for a proposed return of over 25%.” The target was met on Jan. 24.

After topping at over $23, ATI retraced its breakout path. In late January, S&P Capital IQ raised its 12-month target by $4 to $26, maintaining a 4-star buy rating on shares.

Prime customers include companies in the aerospace, chemicals and electrical energy industries. S&P projects that 2017 will begin a long period of sustained growth for a major segment of ATI’s business, the High Performance Materials & Components segment.  This is supported by long-term agreements on legacy and next-generation airplanes and jet engines. S&P estimates earnings of 80 cents per share this year, and a gain of $1.20 in 2018, which they deem “an inflection point in profitability and strong long-term growth potential.”

The shares gapped up in mid-January, meeting my trading target of $22 on Jan. 24. Since then, the stock has found support at the 200-day moving average, now at about $17.25 and a support line at $16 that is drawn from July 2016. Accumulation has been steady, and MACD is in the green buy area.

Thus, I believe ATI is again a value at $17.50 for a trading target of $22. That would generate a proposed return of more than 25%.

However, while I like Allegheny Technologies for a trade here, I believe investors will most likely achieve higher returns by holding this stock longer than 12 months.

Allegheny Technologies (ATI) chart
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