Don’t let the 0.2% down day fool you. JetBlue Airways Corporation (JBLU) suffered heavy turbulence following Tuesday morning’s earnings announcement.
Tuesday’s trading session rocked JBLU taking shares down as much as 7% before the airliner ascended back to virtually unchanged on the day. As you might expect, volume ran hot all day with 18.4 million shares changing hands by the closing bell.
Following such a wild trading session, the near-term direction of JBLU is difficult to discern. And it’s not just the epic intraday volatility making forecasts tricky, JetBlue is sitting smack dab in the middle of its three-month trading range. Support looms large at the $19 level, which incidentally, is where shares rallied back yesterday.
On the flip side, resistance at $21.50 has halted JBLU stock’s prior two rally attempts in short order. JetBlue’s circuitous travels leave little to go on from a technical perspective to suggest whether its eventual resolution will be higher or lower.
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So, rather than guessing, simply wait for confirmation one way or the other. JBLU lovers looking to scoop up shares down here should wait until the stock finally musters the strength to break back above the aforementioned $21.50 resistance.
Such a breach would return the stock to a short-term uptrend showing buyers have once again wrested control.
If you think yesterday’s intraday dive is a sign of things to come, then keep an eye out for a breakdown below the $19 support zone. Bulls have defended that price zone vigorously so an eventual failure will likely signal the commencement of the next down leg for JBLU stock.
Take Your Pick in JBLU Options
With earnings now in the rear view mirror, implied volatility for JetBlue options has dropped considerably. And that means options (calls and puts) can be snatched up on the cheap.
The trade for playing JetBlue post-earnings is simple: Bulls should buy calls on a breakout above $21.50, bears should buy puts on a breakdown below $19.
Consider using September expiration to allow ample time for the stock to trend following either breakout. The Sep $20 calls, currently trading for $1.70 should do the trick for bulls, while the Sep $20 puts, currently trading for $2.20 should work for bears.
At the time of this writing Tyler Craig had no positions in any of the aforementioned securities.
