Airline stocks, among many other sectors, have been on fire over the past several months with many rallying over 100%. Yet as everyone involved in the market knows. What goes up must come down, eventually. Airline stocks are on the verge of a possible trend reversal and some have already broken there short term bull trends such as DAL breaking down its ascending wedge pattern today.
I feel shorting is the safer side of the bargain for air liner stocks as the Iceland Volcano has cost airliners millions and millions of dollars per day. Flights are back open yet if the volcano remains active then future flights are likely to be canceled frequently due to ash clouds.
This is also right as the DOW is trading at 18 month highs and battling with the 11k level which has shown to be a very volatile and choppy area to trade in. Theres no doubt that the market is overbought and profit taking and short term trend reversal will eventually come. As earnings are coming up we may see the typical buy the rumor sell the news theory play out. Tomorrow we have some major earnings such as Goldman Sachs for the financial sector which has been carrying the market. As for airlines DAL reports earnings tomorrow as well which are likely to be positive yet the trend just broke. I day traded DAL, AMR, and LCC on the short side today for profits but its my rule of thumb to never hold stocks through earnings. Unfortunately earnings had to come at a time when the chart setups are perfect and the Iceland Volcano is weighing in heavy on the air line sector. If DAL post strong results tomorrow though then we could easily see a pre-market gap up and squeeze a lot of the shorts. This could also create a new short opportunity though at higher prices which i will look for possibly opportunities. I would have held onto my short positions in DAL, LCC, and AMR yet with DAL and GS reporting earnings tomorrow morning. Look out for a wild open. I’d rather play safe then sorry and trade the post earnings action. Not try to play the guessing game of which way we will gap.
DAL Earnings: April 20th
AMR Earnings: April 21st
CAL: April April 22nd
LCC Earnings: April 27th
UAUA Earnings: April 27th
Technical Analysis: DAL, CAL, AMR
Disclosure: no positions