I recommended airline stocks, American Airlines (AMR) in particular, as a play on oil falling in price from its highly speculative levels. I figured oil would pull back quite a bit after the Fed announced it would halt future rate cuts since oil has been rising mainly as a hedge against the falling dollar. However, after a very brief fall, speculators have sent oil right back up in spite of bearish reasons for oil to go down.
Yesterday it was reported oil inventories rose 5.7 million barrels last week and supplies of oil have now climbed a total of 11.9 million barrels over the past three weeks. However, oil continues to go up for reasons such as supply disruptions in Nigeria that only affect a few thousand barrels.
Due to the nonsense that is going on in the oil market, I am going to recommend selling American Airlines essentially at the price I recommended it at. I should have recommended selling the news after the Fed meeting but I didn’t think oil would surge up from its bubble-like levels in the face of bearish news. I will throw in the towel for now but this is a trade I will keep an eye on.
Disclaimer: I have no position in AMR.