In December, airline stocks flew into severe wider market turbulence, but the “fasten seatbelt” sign may be ready to be switched off moving into 2019.
According to the International Air Transport Association (IATA), the airline industry’s net revenue could increase by 10% this year due to lower jet fuel prices and ongoing moderate global economic development. “We anticipated growing expenses to erode profitability in 2019, but the steep drop in oil prices and robust GDP growth estimates have offered a cushion,” the association’s CEO, Alexandre de Juniac, told Bloomberg. Despite its optimism, the IATA cautioned that trade disputes and Brexit may hinder growth.
Those looking to trade airline stocks should look at these three industry leaders, which seem to have reached critical support levels. All three are among the top five positions in the US Global Jets ETF’s 34-stock portfolio (JETS).The exchange-traded fund has lost 15% this year, compared to 7.68% for the S&P 500 index.
Delta Air Lines, Inc. (DAL)
Delta Air Lines, Inc. (DAL), located in Atlanta, was founded in 1924 and operates a fleet of approximately 800 aircraft throughout the United States and across the world. After exceeding analysts’ third-quarter profits and sales projections, Deutsche Bank raised the airline’s shares from hold to buy. Delta stock is down 12.06% year to date (YTD) at $50.41, with a market capitalization of $34.45 billion and a 2.92% ahead dividend yield, beating the sector average return by approximately 7.5% as of Dec. 27, 2018.
Throughout much of 2018, Delta’s share price moved within a 20-point range, establishing unambiguous swing highs and swing lows. After falling along with the larger market this month, the stock produced a reversal candlestick in Wednesday’s trading session near the $48 level, establishing critical support from the swing lows in February and July. Long traders might set a stop-loss order below yesterday’s low and aim for profits between $54 and $56, where the price may encounter resistance from the 200-day and 50-day simple moving averages (SMAs) and horizontal line price action.
United Continental Holdings, Inc. (UAL)
With a market capitalization of $22.83 billion, United Continental Holdings, Inc. (UAL) conducts over 4,000 flights each day to five continents through its fleet of 1,262 aircraft. Despite growing fuel prices, the Star Alliance member airline’s third-quarter earnings increased by almost 30%. As of December 27, 2018, United stock had a stunning 24.33% YTD return, surpassing the S&P 500 by more than 30%.
United’s chart shows three distinct pullbacks in 2018 while its share price increased. A horizontal line connecting the January swing high and October swing low, as well as the rising 200-day SMA, provided support for December’s current retracement of 13.34%. Those wishing to trade the stock might set a profit goal of $97.85 and a stop loss below the $79 support level. If the price climbs to the 50-day SMA, consider adjusting the stop to the breakeven point.
American Airlines Group Inc. (AAL)
American Airlines Group Inc. (AAL), headquartered in Fort Worth, Texas, provides passenger and cargo air transportation services. With a market capitalization of $14.87 billion, the firm has a fleet of over 950 aircraft that serves 350 destinations in around 50 countries. Despite being competitively priced, with a future price-to-earnings ratio of just 6.2, American Airlines shares has outperformed other major airline companies this year, plunging more than 40% YTD as of December 27, 2018.
American Airlines’ stock had been trending down for the most of 2018, but it produced an 8.65% turnaround Wednesday to finish above October’s swing low. Swing traders who begin a long position at the present price should look to profit on a pullback to the $40 level, where the price is met with resistance from a 10-month downtrend line and the 200-day SMA. Stops might be placed underneath yesterday’s bullish engulfing candlestick.
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