Morning Market Thoughts

by DAN Good morning. After yesterday’s rally, sparked by enthusiasm that the Fed will be on the sidelines until at least June, it is worth noting that the only major index average that is positive for the year is the Dow Jones Transportation Average. The rest are close…but still negative.

I am looking at some of the airline stocks and several have potential to move higher from current levels.

Look at American Airlines Group (AAL). The stock has been trading sideways since last May. Yes, it has been a wide, volatile range…but it is a trading range nonetheless. Watch for a breakout above $43.

United Continental (UAL) is also close to breaking out, with $60 being current resistance.

Hawaiian Holdings (HA), while more extended than the others, still looks like it has more fuel in the tank as it continues to hit all-time highs.

Spirit Airlines (SAVE) has been working on getting into a new uptrend and has pulled back from the 200-day moving average. I’d say that, as long as the stock remains above $45, the stock is at a low-risk buy point.

You can track the airlines by looking at the XAL–X — the Amex Airline Index.

Away from airlines, you might want to check out JBHT, FDX (up big this morning due to stronger than expected earnings yesterday)

Railroads — I tend to cover a few of those in our Strategy Sessions. Keep tabs on UNP, CSX, NSC and KSU.

It seems to me that oil is the culprit behind the rise in railroads. With oil looking like it’s bottomed last month, the recent advance in oil prices is good for railroad companies because they get paid to transport oil. A higher oil price translates into increased loads as producers work harder to produce more oil. Airlines have been trending lower in sync with oil, which seems a bit odd, right? Lower fuel costs result in lower operating expenses. Here’s sobering thought: Can you imagine how horrible the airlines would have done if oil had been moving HIGHER? They’d all probably be grounded.

There are a lot of relationships between stocks, sectors, and commodities. Compare the price of oil with the price of the US dollar. As the US Dollar started breaking down in early February, oil starting working its way higher. After all, the amount of oil in a barrel is fixed. If the Dollar isn’t worth as much as it was last month, then it’s going to take more bucks to buy a barrel. Viola! Oil prices are going up.

Try to get into the habit of looking for these types of relationships. They will help you generate trading and investing ideas without being subject to the whims of whoever is on CNBC touting their positions. Simply put, you’ll become a more aware trader.

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Thanks for attending last night’s Q&A Webinar. There were nearly 1,000 registered, and I’m hoping that it was worth the price of admission. Last night I mentioned that I’ll be including a review/tutorial of Bollinger Bands in the Weekend Update. In such a volatile market, it pays to put statistics on your side. So watch for that in this weekend’s videos.
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Have a great day!

–Dan

Market Update