Time to Short Airlines as OPEC Cuts Crude Output

I’ve been watching in bewilderment at how much airline stocks such as UAUA, AMR, DAL, LCC, and RJET have have rallied without any real profit taking to set in yet. I shorted RJET a few times mostly for profits as I’m looking to catch this on the down side once people start taking there profits. And it's not a matter of if this will happen, it's when. With every huge sector rally, there's always a point when it peaks and retraces a significant amount before it continues going up, levels, or continues to fall.

OPEC scheduled an emergency meeting for Friday, October 24th, and is expected to cut crude oil output by an unknown amount. Demand for oil has been on the decline which has led to oil dropping around 55% from its peak near 150. Falling oil prices has meant increased profits for airlines, which is why the airline sector has been skyrocketing. Yet with rumors of the OPEC cut, hugely overbought conditions, and airline stocks losing momentum, this seems like it could be the beginning of a good time to catch airline stocks on a downside move, at least in the short term.

I’ve been trying to go short in several of them, yet shares have been hard to borrow. I managed to borrow some shares of RJET at 12.43 on Wednesday and alerted Black Service Members to go short. UAUA was also another very appealing airline stock and fell as far as 20% Thursday during the session, yet I wasn’t able to get any shares to short.

RJET Technical Analysis:

Disclosure: Short RJET.

Comments

[User 227527:]

You have no clue what you're talking about!

2008 Oct 24 09:47 AM

[Cameron Fous:]

Just Covered RJET this morning at 11.17 for +10.5%

2008 Oct 24 09:55 AM

[yestersay:]

"taking their profits"

And, IMHO, too soon to pull short trigger...

2008 Oct 24 10:18 AM

[CLH:]

Forget OPEC they dont have a monopoly and cant control the price --either up or down.

2008 Oct 24 10:42 AM

[shortless:]

You have no idea what you are talking about. Your short ideas are pure gambling with out any idea what the house stakes are.

i.e. RJET does not pay for any of its fuel, they have long term contracts with majors that can only be broken during bankrupt filings, and RJET has invested stakes with all types of options in many of their partner contracts.

Of all the ones you missed you need to take a closer look at US airlines and their actual cash not their book BS. Even at that I would not be shorting transportation at this time if you take a closer look at historical down turns.

2008 Oct 24 10:52 AM

[Cameron Fous:]

Haha you guys forget that im a technical short term trader... And i make money.. Anyone who is trying to look into the fundamentals and all that rubbish in the stock market is losing money... I already covered my short position in RJET for a sold gain in 2 days. In relativity airlines move in the opposite direction of oil and thats what i banked on.. So you don't know what your talking about..

Good luck trying to predict the long term outlook of this market while i profit daily

2008 Oct 24 12:43 PM

[duhhh:]

Oops! OPEC cut production and oil prices are down! Well done Sir Fous.

You really don't know what you're talking about!

2008 Oct 24 12:55 PM

[bsharvy:]

A technical trader whose main argument here is about demand and OPEC cuts.... mmmmm. Calling the airlines' attempt to come off their lows a "huge sector rally" is silly.

2008 Oct 25 05:48 PM

[sickofthehype:]

My kid can beat up your kid...
Take that.

2008 Oct 25 09:08 PM

[SammyBaby:]

Mr. Fous is right. They don't call me SammyBaby for nothing.

2008 Oct 25 11:59 PM

[Scotterz:]

How long do you think before the FTC reinstates the uptick rule for selling short shares again?

2008 Oct 27 12:57 AM

[Alex Filonov:]

It's almost always good time to short airlines. No matter which way oil is going. Especially when they are up without good reason. As a good reason I perceive profits, not some moves in oil prices. There is only one consistently profitable airline in this country, Southwest. Airtran might be close. All others are going into bankruptcy once in 7-10 years, i.e. good short candidates.

2008 Oct 28 01:36 PM