Technical Glitches Slam United Continental (UAL)

Is there any company that has had as much bad luck as United Continental Holdings Inc. (UAL) this year?

Early last month, UAL was forced to delay takeoffs from U.S. airports due to a technical issue affecting their logistics coordination system, affecting approximately 150 flights. Wall Street was unimpressed with the setback and, within a week, United stock lost 8% of its value

Then, just recently, United Continental suffered another critical failure, with UAL management revealing that a computer glitch related to a router problem caused the cancellation of about 60 flights and delayed more than 800 others.

The timing could not have been any worse. On the same day that United Continental flights were grounded, all trading platforms of the New York Stock Exchange were suspended at 11:32 a.m. ET, resulting in an eerie silence in the markets lasting for more than three-and-a-half hours.

The official explanation — courtesy of NYSE spokesperson Marissa Arnold — was slightly less ambiguous than UAL’s story, citing “technical” issues. However, in both cases, the media reported that nefarious activity was quickly ruled out.

Still, it will be difficult for investors to psychologically dissociate United stock’s troubles with the underlying issues of cyber-security. In addition to the embarrassing dilemmas plaguing the markets, the Wall Street Journal‘s website temporarily shutdown at almost the same time as the NYSE.

While it’s theoretically possible that simple coincidence manufactured this astounding concurrence of events, it seems highly unlikely, leading many traders to wonder if United Continental may have suffered a security breach.

United Stock Suffering in 2015

Even UAL wasn’t breached, a second computer-related disruption in two months time has likely stretched investors’ patience towards United stock to the limit. Year-to-date, UAL is down 21%; United stock couldn’t afford bad news even before this latest conspiracy of misfortune.

UAL stock, technical chart
Source: Source: JYE Financial, unless otherwise indicated

A look at the daily technical chart of UAL clearly shows the development of a bearish pennant formation, pouring salt on United Continental’s wounds. Such a pattern typically develops after a downtrend and represents a respite from selling pressure before the dominant bearish trajectory reasserts itself in the markets.

For United stock, this might be the kiss of death that eventually sends UAL down to the $40 level, where the bulls and bears will then reassess the matter before deciding on the next macro move.

While the trading suspension at the NYSE is considered completely unrelated to United Continental’s technical malfunction, the psychological association of the two events may quickly rear its ugly head. But even if nothing substantive occurs, it’s one more public relations nuisance that UAL doesn’t need.

As of this writing, Josh Enomoto did not hold a position in any of the aforementioned securities.

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