Delta Air Lines, Inc. Stock Is Soaring Much Higher Now

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DAL - Delta Air Lines, Inc. Stock Is Soaring Much Higher Now

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The Dow Jones Transportation Index recently eclipsed 10,000 for the first time in history. The surge to record highs is breathing new life into cyclicals like truckers, rails and airliners. Delta Air Lines, Inc. (NYSE:DAL) in particular looks as healthy as a 747 fresh off the assembly line. And today’s breakout makes DAL stock worth a trade.

2017 hasn’t exactly been a banner year for DAL stock. Unlike the rest of the market, Delta spent its days mired in a sloppy trading range. Its few moments of brilliance were eventually upended by downtrends. But with Santa coming around the corner, the stock finally decided to behave itself, gifting bulls with positive price action and a newfound uptrend.

Since breaking out in early-October with a high volume, mega-candlestick, DAL has formed a textbook cup-and-handle pattern. The descent forming the left side of the cup was matched by an equally rousing ascent to create the right side.

Both the 20-day and 50-day moving averages are rising nicely beneath the price as well, showing bulls have officially wrested back control of the short and intermediate trends.

Yesterday’s bullish engulfing candle spelled the end of the handle and today’s up-gap is confirming the breakout attempt. I fully expect DAL to retest its highs near $56 by Christmas.

Delta Air Lines, Inc. Stock Is Soaring Much Higher Now

Source: OptionsAnalytix

A rise in implied volatility has accompanied the recent price rise, showing that demand for options is on the rise. That’s inflating premiums and making option selling strategies an attractive proposition. And since this morning’s up-gap is fading slightly, a play like the bull put spread will offer some margin for error in case DAL drops a bit before eventually heading higher.

DAL Bull Puts Are Ready for Take-off

Sell the Jan $50/$46 bull put spread for 45 cents credit. Consider it a bet that Delta sits above $50 at expiration. The max reward is limited to 45 cents, and the max risk is $3.55. To minimize the damage if DAL hits turbulence, I suggest exiting on a break below the short strike price at $50.

As of this writing, Tyler Craig didn’t hold positions in any of the aforementioned securities. Want more education on how to trade? Check out his trading blog, Tales of a Technician.

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