Stocks are under pressure on Monday as traders return from the long holiday weekend and come back to reality. The Dow Jones Industrial Average is struggling to hold above the 17,000 level (and Dow mini-futures are near 16,900) as worries mount over Tuesday’s unofficial start of Q2 earnings season amid very high expectations.
The geopolitical situation is also simmering with Israel gearing up for another conflict in Gaza and the U.S. government scrambling to respond to a potential al-Qaida plan to bomb an airliner with dummy phones or laptops.
Airline stocks are under pressure in response. The industry was already on its heels after Delta Air Lines (DAL) reported disappointing passenger revenue for June last week. Stocks in the group were massively overextended and were the target of successful put option positions for my Edge Pro subscribers back in April. We bagged a 256% return on our April puts against American Airlines (AAL) at the time. Our Southwest Airlines (LUV) position gained 140%. And our United Continental (UAL) position gained 100.4%.
I think the industry is ready to hit another pocket of turbulence, with shares likely to lose additional altitude. Here are three vulnerable looking airline stocks ready for put option or short side plays: