With the price of crude oil bumping up against stiff technical resistance and rolling over, it could be the right time to look at airline stocks that ultimately stand to benefit from a reduction in fuel costs.
According to Dave Fuscus, spokesman for the Air Transport Association, “Fuel represents 11 percent of airline operating costs, the second highest expense after labor.”
He also had this to say: “Every time the price of jet fuel goes up a penny, the cost to the industry goes up $170 million annually.”
With the remainder of 2016 shaping up to be a good year for airline companies, we’ve discovered three bullish plays using Profit Scanner’s Technical Event Screener to help filter for technical breakouts.
Let’s dive right into the first opportunity.
Airline Stocks that Are Soaring: JetBlue Airways Corporation (JBLU)
JetBlue Airways Corporation (JBLU) is a passenger carrier company that provides air transportation services across the United States, the Caribbean and Latin America, and operates various types of aircrafts, including the Airbus A321, Airbus A320 and Embraer E190.
In the daily chart above, you’ll notice the “Hammer” outlined by a red box. This specific candlestick tells us that the price of JBLU may have reached the bottom of the recent downtrend after recovering from a sharp decline for the session.
The Hammer appears during a downtrend, displaying a long lower shadow (also known as a tail) with a small real body at the top of the range. The price may be developing a bottom and due for a reversal to the upside.
Profit Scanner alerted subscribers of the service about this event on June 27 when JBLU closed at $15.15 per share. With a clear reversal firmly in place, investors may be able to establish positions at a discount and look for a potential exit near $17.50 resistance, which would provide gains of up to 6.6% based on the current price of JBLU.
Airline Stocks That Are Soaring: Avianca Holdings SA (ADR) (AVH)
Avianca Holdings SA (ADR) (AVH) is a Panama-based operation engaged in air transportation services for passengers and commercial purposes. The company was originally established as a strategic alliance between Aerovias del Continente Americano SA AVIANCA and Grupo TACA Holdings Limited, and it mainly operates in North, Central and South America, the Caribbean and Europe.
On the weekly price chart above, the “Rounded Bottom” formation shows that there has been a gradual shift from a downtrend to an uptrend. Volume diminishes near the bottom while the stock trades within a range and finally bursts as investors become more decisively bullish.
While Rounded Bottoms are rarer than other reversal patterns and often span a longer period of time, they usually mark a major turnaround in a stock, and that’s exactly what we have here with AVH.
Profit Scanner currently has an $11.75 price target for AVH on the conservative end. With Avianca stock closing Wednesday at just $6.06 per share, investors could pocket gains up to 93.89%.
Airline Stocks That Are Soaring: China Eastern Airlines Corp. Ltd (ADR) (CEA)
China Eastern Airlines Corp. Ltd (ADR) (CEA) is an air carrier that is engaged in the operation of civil aviation, including passenger, cargo, mail delivery, tour operations and other extended transportation services. It operates a fleet of over 550 aircraft, including 530 passenger aircraft — most with a seating capacity of over 100 seats.
Now, let’s look at the stock. Profit Scanner confirmed a “Continuation Wedge” bullish pattern on the chart that represents a temporary interruption to an uptrend and takes the shape of two converging trendlines, both of which are slanted downward against the trend.
During this time, the bears attempt to win over the bulls, but, in the end, the bulls triumph as the break above the upper trendline signals a continuation of the prior uptrend.
This highly reliable technical formation calls for shares of CEA to eventually rise to $32 on the conservative end, which, if realized, would yield investors gains of up to 26.33% based on the current price level of $25.33 at the time of this writing.
Profit Scanner powered by Recognia can help traders of all levels uncover these signals to determine the best timing to buy. Or use Profit Scanner’s technical insight to validate your own trading ideas. See how easy this powerful tool is to help you uncover hidden opportunities in the market.