Shares of Delta Air Lines, Inc. (NYSE:DAL) year-to-date have fallen about 30% among a general malaise among airline stocks and at least in part due to the rising price of oil.
Fundamentally, one could argue that U.S. airlines are in great shape but the economic overhang, i.e. growth slowing, may keep these stocks capped for the time being. In the near term, however, DAL stock as arrived at an interesting technical juncture where a bullish bet may make sense.
Delta is scheduled to report its next batch of earnings on July 20, i.e. in less than two weeks. For me, this means either getting back out of this trade before the earnings announcement and/or working with a well-reduced position size.
Do some research on airline stocks and one will quickly come across plenty of views that airlines are lousy businesses too reliant on consumer confidence and the price of oil.
While in my mind there is certainly some truth to this view, through the lens of an active investor, I also know that airline stocks can often see sharp moves through a multiday/week/month period that can be highly profitable to participate in.
DAL Stock Charts
Looking at DAL stock through a multiyear lens, we see that the stock has now — for the first time since late 2012 — arrived at its red 200-week simple moving average.
While this in and of itself, of course, does not warrant taking a bullish stand in the stock, we are seeing a multitude of other technical factors take hold at the present juncture. The June lows also coincided with horizontal support as marked by the blue box as well as MACD oversold readings to the extent we last saw in the financial crisis in 2008.
All of this could allow for a well-defined risk-reward bounce play in DAL stock for active investors and traders.
On the daily chart, we see that at the June lows, DAL stock briefly poked below its multimonth down-trending channel and has since given us two bullish reversal candles.
While the stock still remains below its eight- and 21-day simple moving averages (blue and yellow lines respectively), I find that leaning against the June lows near $32 for a bounce play into the $38 – $39 area is a trade worth considering.
On the daily chart too, momentum oscillators are well oversold and begging for some mean-reversion to the upside. Any break back below the June lows on a daily closing basis should act as a last-resort stop loss.
Like what you see? Sign up for our daily Beat the Bell e-letter and get Serge’s investment advice delivered to your inbox every morning! Download Serge’s Free Special Report: 6 Keys for Successful Trading and Investing.