Stocks are under serious pressure Tuesday morning with the major averages testing below their 50-day moving averages for the first time since early February.
The catalyst was another strong reading on the U.S. jobs market — this time, from a Labor Department report that showed the number of job openings surged to the highest level since January 2001. This greatly increases the chances the Federal Reserve prepares for a June interest rate hike, the first since 2006.
As a result, the sellers are on the attack for the first time in months, hitting areas such as airline stocks that, for a long time, have seemed invincible.
With technical support levels in jeopardy, here are three stocks in the group worth a look on the short side.
3 Airline Stocks Hitting Turbulence: American Airlines Group Inc (AAL)
Stock for American Airlines Group Inc (NASDAQ:AAL) looks set to fall below its four-month support level near $46, which would put the 200-day average in play. The company reported a 0.7% year-over-year drop in revenue passenger miles on Tuesday, which dampened sentiment.
I have recommended the Mar $48 puts to my Edge Pro subscribers.
3 Airline Stocks Hitting Turbulence: Delta Air Lines, Inc. (DAL)
Delta Air Lines, Inc. (NYSE:DAL) stock is showing a very similar pattern to AAL, threatening to fall out of a multi-month topping pattern. Call options saw some action following activity on Monday that’s getting pressure now, as well as from chatter about a possible investigation into the Delta jet that skidded off the runway amid a snowstorm at LaGuardia Airport last week.
I have recommended the Mar $44 puts to my Edge Pro subscribers.
3 Airline Stocks Hitting Turbulence: Southwest Airlines Co (LUV)
Southwest Airlines Co (NYSE:LUV) is making a rare excursion below its 50-day moving average a level that has, with rare exceptions, held the stock during its quadrupling since late 2012. Some profit-taking is setting in now.
The 200-day moving average hasn’t even been approached since 2013, to give you an idea of how long it’s been since LUV stockholders have suffered a bout of panic.
I’m keeping LUV on my put option watch list.
Anthony Mirhaydari is founder of the Edge and Edge Pro investment advisory newsletters.
