Last week’s mild bout of profit-taking was just what the doctor ordered for stocks in need of a breather. And, I might add, the list of overbought stocks needing a reprieve was quite large, what with so many big winners this year. Airline stocks are a perfect example. Many have flown to new 52-week highs, some have even reached record highs.
But chasing stocks at dizzying heights is never as satisfying as scooping them up at a discount. You see, savvy traders are loath to chase.
Instead, they lie in wait until a multi-day retreat ushers shares to a lower-risk entry point. These pullbacks bring stock prices back to support levels, which are altogether more attractive to deploy new trades from.
And that is exactly what’s happened with airline stocks. Their uptrends remain firm and last week’s retracement is providing an excellent buy-the-dip opportunity. Check out these three airline stocks ready for takeoff.
Airline Stocks to Buy: Delta Air Lines (DAL)
Delta Air Lines, Inc. (NYSE:DAL) shares are arguably the strongest of today’s trio. Last week, DAL stock notched a new record high at $53.57.
Its uptrend boasts rising 20-day, 50-day and 200-day moving averages. And it’s increasing in momentum as suggested by the RSI confirmation signal generated last week.
The recent retracement was shallow and lacked any significant signs of distribution. The candlestick formation of DAL’s pullback was also quite clean.
Thursday’s doji candle was followed up by a bullish reversal candle on Friday, illustrating a shift in control from bears to bulls.
To capitalize on Delta’s next ascent, buy the Aug $50 calls for $3.50.
Airline Stocks to Buy: American Airlines (AAL)
The action in American Airlines Group Inc (NASDAQ:AAL) shares have been similar to DAL. Which, on a side note, should not be surprising. Stocks in the same industry virtually always develop patterns of a similar nature.
While AAL stock didn’t score a new record high, it did notch a new 52-week high during its latest ascent. Last week’s retreat carried the stock back to its rising 20-day moving average, which is a logical spot for support to form.
Like it’s predecessor, AAL also saw RSI confirmation on its previous upswing, signaling its trend is increasing in momentum.
If AAL pops above Friday’s high ($49.45), buy the Aug $49 call for $2.60.
Airline Stocks to Buy: Alaska Air Group (ALK)
Our final airliner is Alaska Air Group, Inc. (NYSE:ALK). Unlike DAL and AAL, ALK stock’s uptrend is arguably in its infancy. It just recently popped back above its 50-day moving average and formed a higher pivot high.
There are two ways to view this. Either ALK is the weakest stock of the bunch and destined to continue its underperformance. Or, ALK is due to play catch-up and will eventually tag its 52-week high near $100.
I’d argue for the latter, but either way, the stock has a solid pullback setup here.
Buy the Aug ALK $90 call for $3. ALK options are illiquid, so limit orders are a must.
At the time of this writing, Tyler Craig had no positions in any of the aforementioned securities.