On Thursday, shares of Delta Air Lines, Inc. (NYSE:DAL) rallied 3.6% on the back of still weak oil prices, positive industry news that point to higher traffic over the Christmas holidays and general analyst optimism. As a result of Thursday’s positive price action, DAL stock increasingly looks giddy to break to fresh year-to-date highs.
Active investors and traders can look to play a breakout … but must remain diligent and respect any near-term volatility potential in the broader market as we near next week’s FOMC meeting.
U.S. airline stocks as a group by and large have held fairly steady for the year to date, influenced at least in part by the drop in oil prices. Airlines don’t pass on their lower input costs (in this case, oil prices) on a one-to-one basis to their customers, which is to say that the downward spiral in oil prices means better bottom lines for the carriers.
On Thursday, the industry trade group Airlines for America projected that traffic looks to increase around 3% over the holidays on a year-over-year comparison. Additionally, a prominent airline analyst from JPMorgan projected another year of record profits for U.S. airlines in 2016. This helped propel higher most U.S. airline stocks on Thursday.
But to yours truly, the price action in DAL stock looks the most promising of the group.
DAL Stock Charts
Looking at Delta shares through the multiyear lens, we see that while dips continued to get bought, it has largely spent 2015 in a sideways channel, consolidating the gains from 2013 and 2014. The late-August dip — which on a weekly basis held lower-level support — got bought aggressively, and at present DAL stock is once again at the very upper end (marginally) of the nearly 12-month consolidation phase.
In the bigger picture, these types of consolidation phases can be labeled as healthy and ultimately see good moves higher, albeit not in a straight line.
Zooming in on the daily chart, we see that the near-term moving averages — in this case, the 8- and 21-day in blue and yellow, respectively — have been a good tell for when the stock is trending higher or lower. On Wednesday, DAL stock found support at both those moving averages, which was followed through with buying on Thursday.
While Delta gave it a good shot to try and overcome its November highs, ultimately the broader-market weakness in the afternoon session also weighed on DAL and kept it from closing at its absolute highs for the day.
Nevertheless, DAL stock made a good run for it on Thursday, and the odds are increasingly pointing toward an eventual break above the $52 area, which should then open it up into the mid- to high $50s over the next few weeks or even months.
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