Earnings season is set to kick off this week, and Delta Air Lines, Inc. (NYSE:DAL) is one of the first few dozen companies to report, as well as the first of the major airlines. The sharp rally in DAL stock since last summer has put shares in an interesting chart spot as we head into earnings.
Here’s my take on how to trade Delta stock following its earnings report, due out Thursday, Jan. 12, after the bell.
I last discussed a trade idea in Delta all the way back on July 7. At the time, I said DAL stock seemed to be improving its near-term posture, just as it was nearing critical support on the longer-term charts.
I also said one could look to play an initial bounce versus the June lows using an initial price target in the high $30s, representing about an 8% move in the stock. This price target was reached just a few days later, and the June lows have held ever since.
Before looking at Delta’s stock charts, note that the improvement in both U.S. and some global economic data over the past three months (after many data points had been slowing for about 12 months) should also spell positive things for airline stocks, which by definition are cyclical in nature.
DAL Stock Charts
We can gain a lot of perspective on stocks and other asset classes by looking at several time frames.
The longer-term view on Delta stock reveals that despite the sharp rally over the past five or so months, shares remain rangebound with the low $50s still acting as resistance. Through a pure price action lens, this area of resistance must first be cleared for longer-term bulls to get excited again.
However, also note that the summer 2016 lows did coincide with the rising red 200-week simple moving average. Thus, weakness in the first half of 2016 helped reset the stock somewhat and worked off these longer-term overbought readings.