The technical case for shorting Alcoa

Alcoa enjoyed a huge 2014, rising 48 percent, and outperforming every component of the Dow Jones Industrial Average, of which it was a component until September 2013.

That irony aside, Alcoa's surge in 2014 presages a painful 2015 for the stock, according to Sterne Agee chief market technician Carter Worth.

First of all, Worth isolates the four other years since 1980 when Alcoa rose by more than 40 percent. In each year that followed, the stock fell sharply.

On the chart itself, Worth finds further troubling factors.

He says that in September, the stock suffered "a well-defined break in trend. And then it throws back right to the underbelly of the trend and drops again."

"This has all the elements of a topping-out formation," Worth said Friday on CNBC's "Options Action."

Additionally, where Alcoa appears to have topped out is just about the level at which the stock turned around in 2010 and 2011.

"The advance of the last 18 months leaves you right at the tops of a five-year range," he said. That's a "very difficult level."

"Sell Alcoa," he summed up.


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    Melissa Lee is the host of CNBC's “Fast Money” and “Options Action.”

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