With the market becoming aware that Arconic (ARNC) produced the cladding used on the burnt out Grenfell tower in London, the stock opened sharply lower (intra low $22.59), settling -4.1% at $24.28. Near term outlook is very bearish, with at least a re-test of this morning's low.
Frankly, considering the severity of the recent Grenfell tower fire, its almost a wonder that Arconic - now named as the company who produced the flammable product that covered the tower, didn't drop more today.
For yours truly in the north west of the London metropolis...
Looking to the south west, just two of the towers cladded in Arconic products, that have both failed emergency safety tests. Both towers - along with at least 58 others, will need to be stripped, and eventually re-clad. There are around 600 clad towers in England, and its possible >500 might be affected. Exactly who is going to pick up the tab for that (roughly $3 million a tower) is yet to be decided. Indeed, it will likely be argued within multiple courts, and such a decision might easily drag out for some years.
Ohh, and consider this... its not just a UK problem, its an issue across many countries.
Arconic announced today they will no longer sell its product for us in 'high rise' buildings.
No doubt this story will eventually fade for Arconic, but its not one the UK - and especially London populace, will forget about for many years to come.
Today's candle was a very strong hollow-red reversal type, managing to settle above the 200dma. Generally, those are indicative of a key floor. However, considering the seriousness of the product problem, and the fact the story will likely run for months to come, further weakness can be expected in the short and mid term.
The next big support is the psy' level of $20.00. The bigger monthly cycle is offering the 17/16s, which do seem a threat by the autumn, not least if the main market eventually experiences a basic retrace of 5%.
Unquestionably... bearish ARNC