The Dow Jones Transportation Average has officially recovered from its early-2018 meltdown. With last Monday’s close of $11,436, the oft-watched Index officially eclipsed its Jan. 16 peak and notched a new record high.
In celebration of the comeback, we’re going to look at a resurgent industry in the space — airline stocks.
After the February crash, airline stocks were languishing. But momentum finally arrived in the form of earnings announcements worth celebrating. They struck in July, and the uptrends that have since formed in leading airliners has yet to lose steam.
Last week’s mild pullback is offering lower-risk entries into a number of high-quality stocks. Here are three airline stocks flying high:
3 Airline Stocks Flying High: Delta Airlines (DAL)
Delta Airlines (NYSE:DAL) recently broke through a cluster of overhead resistance zones and now appears poised to revisit its all-time highs at $60.79.
Like all well-behaved uptrends, DAL stock is perched above a rising 20-, 50- and 200-day moving average. With the recent rise, Delta is now in the midst of a gap area created by its January earnings release.
Buyers should continue to press their advantage until the gap is officially filled.
To capitalize on continued strength, buy the Oct $55/$60 bull call spread for $2.75. The risk is limited to the $2.75 and the reward is $2.25.
3 Airline Stocks Flying High: Southwest Airlines (LUV)
Sparked by a solid earnings report, Southwest Airlines (NYSE:LUV) shares are on the rise. Prior to the July 26 release, LUV stock had started a subtle turn higher but the massive post-earnings rally is really what is driving the turnaround.
Since its recent bottom near $50, LUV has scored a 22% gain. The climb is lifting the 20- and 50-day higher.
Short-term resistance near $62 is giving the stock reason to pause, but I suspect its power is waning. Once buyers are able to shatter this particular ceiling, I suspect LUV will re-visit its prior peak of $66.99.
Implied volatility is low right now making option buys the way to go. Buy the Oct $60/$65 bull call spread for $2.05.
The risk is limited to $2.05 and the potential reward is $2.95.
3 Airline Stocks Flying High: United Continental (UAL)
United Continental Holdings (NYSE:UAL) rounds out today’s trio. Despite its placement as the third selection, it actually boasts the strongest trend of the bunch. While its predecessors remain off their highs, UAL has been notching new records.
It’s the only airliner of the three that is up year-to-date. And it’s not up a little, it’s up a lot. 27.6% to be exact. Last week’s three-bar pullback created a mini-bull flag that is already triggering to the upside.
If you think the good times keep rolling for UAL, then buy the Oct $85/$90 bull call spread for $2.25. The risk is limited to $2.25 and the reward is $2.75.
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.
