Here is a look at the airline sector. (December 28, 2015)
XAL--X SP-500 XAL--X XLV IBB XAL--X HA LUV JBLU UAL AAL DAL
I want to go through an entire sector here just to get a sense of where you are from kind of a top down approach meaning. First of all the S&P is in a downtrend. That could change any day now if the market just starts moving up and then we get our a little “Santa Claus” rally that we will look back on and say, “It started here then we had a couple days break and now we’re up. Who the heck knows then where we’re going be next year? But right now the market’s weak. So I’m looking at the XAL–X ( INDEXNYSEGIS:XAL ) and that’s suspect. You could look at the XLV ( NYSEARCA:XLV ), you notice how that is trading close to the 200-day moving average, just right underneath it. Biotech ( NASDAQ:IBB ) is doing the same thing. We look at the XAL–X ( INDEXNYSEGIS:XAL ), that’s also trading underneath it, though you can see this is in a downtrend, where the other two sectors I just mentioned are going sideways, so it kind of makes a difference in your overall view.
But still, I’ll look at the XAL–X ( INDEXNYSEGIS:XAL ) and I see that we could just say it’s consolidating. But I’m interested enough in it to start looking at airline stocks to see if there’s any that I might want to buy and what my trading plan would be, so we’ll go through them. Hawaiian ( NASDAQ:HA ), “spitballing” here. It’s extended, way extended over the 200-day moving average. You make nice money here. That’s great, but since this top here the stock has been trading sideways for almost two months. It’s been trading sideways and you haven’t really made money. Even if you wound up selling right at the top. Great! I guess you made 5 percent. But really I look at this stock, just on a daily chart, we could see a breakout, say above 40.00, but I don’t see how that breakout would just continue to move up enough to make me want to take a risk right now. So I’m looking at this and I want to wait. I’ll just wait, I’ll watch it.
LUV ( NYSE:LUV ), this to me, as I look at this, it’s kind of a blow-off top. It flew out of this volatility squeeze, this is called a “tombstone doji” but it was a big reversal here. Since that time this stock has been moving lower. So I’m not interested in LUV ( NYSE:LUV ). Now how about JetBlue ( NASDAQ:JBLU )? We like that, right? Well that was then when we were looking at a potential breakout. This could have been it but it turned out that it wasn’t. So if you bought that breakout what are you thinking now? You’re thinking, “I wish I hadn’t bought that breakout,” and you’re selling. And that’s really what we’re seeing right now. This is not something, even if it holds at the 200-day moving average, it’s not really something that I’d be interested in, BECAUSE of all of this resistance up here.
There’s a lot of sideways churning here. You’re not going to see this stock, even if it does hold here, you’re not going to see this stock, anytime soon, just rocket up to there. Why would it do that? What would prompt enough money to come in to soak ALL this supply of stock here, up where people would be willing to sell just to get their money back, to soak all this supply and then continue to move higher? So I don’t see that either. Now we’ll look at United Air ( NYSE:UAL ). This looks actually stronger than the XAL–X ( INDEXNYSEGIS:XAL ) because this has been trading above the 200-day and the 50-day moving average. So I might be interested in this thinking that, okay the stock’s been consolidating for QUITE a while after a big pullback so if the XAL–X ( INDEXNYSEGIS:XAL ) the airlines index, if the XAL–X ( INDEXNYSEGIS:XAL ) starts moving higher United Airlines ( NYSE:UAL ), I’ll set an alert at $62.15, United Airlines ( NYSE:UAL ) might be worth buying.
So this is a possibility, but not right now. Okay, American Air ( NASDAQ:AAL ), it’s also been trending sideways for about the same amount of time as UAL, right? So if this stock starts breaking above 47.00 then maybe that works. Then the last one we’re going to look at is Delta Air Lines ( NYSE:DAL ). This is really interesting because it’s been consolidating for a long time. You look at this, within an uptrend, and this is forming what is known as a “high base”. After a big uptrend it’s been trading long enough, in a sideways manner, to actually give you another base from which the stock can spring higher. Like over a year this stock has been basing.
So THIS one I would be more comfortable actually IF you get a weak day in the market and you could buy it down a couple bucks; this isn’t for a trade, this would be for a long-term position. I would be more comfortable buying this than any of the others. But I would also be quite comfortable buying this if the stock continues to move higher, we’ll say above 54.00. Because again, you look at this graph and you can see that $54.00 might just be the breakout that’s going to let this stock go all the way up to say 60.00 or so. If you’re not a member of Stock Market Mentor and you don’t get my video alerts, you may at least want to take notes on this and then put your own price alerts in your charting system, then you will be alerted when these stocks, or if these stocks fire off.
Free Chart