Once upon a time, it was exciting to write about airline stocks. Now it’s a bore. Headlines have lost their shock factor, and every company from JetBlue (NYSE:JBLU) to Delta (NYSE:DAL) has entered a holding pattern.
Earnings for most tickers in the industry have already come and gone. The lot of them lost mountains of cash, and all their stock prices did was shrug. Today we’re taking a fresh look at JBLU stock to spot the price levels that need busting before taking directional trades.
How We Got Here With JBLU Stock
The novel coronavirus ran roughshod through the airline industry, indiscriminately destroying every single airliner. Mercifully, the lot of them found reprieve mid-March alongside the rest of the stock market. Fueled by reopening hopes, bargain hunters emerged to bid JetBlue and friends back up. The buying binge ended in an epic melt-up in early June that ultimately fizzled.
Along the way, idiosyncratic risk has gone by the wayside. Individual company fundamentals don’t matter when your entire industry is being upended. Either everyone is toast, or everyone survives. At least that’s how the market is viewing things.
The days of differentiation will someday return, but for now, traders are lumping every player into the same highly correlated blob. Analyzing the price chart of JBLU stock is just about the same as analyzing DAL stock or any of its other peers.
For this reason, I like to use the NYSE Arca Airline Index (INDEXNYSEGIS:XAL) to set the stage.
The Holding Pattern
The flight path of airliners can be seen in the XAL chart. Since June’s boom and bust, the industry has been stuck in a holding pattern. Volatility has receded, and expansion is giving way to compression. Adrenaline junkies are being lulled to sleep, dreaming of the good old days.
With equilibrium seemingly found, directional trade ideas are becoming harder to come by. With XAL (and JBLU stock, for that matter) submerged beneath every major moving average, short trades seem to have the upper hand. However, any whiff of good news could send airline stocks flying again. Couple that with their already low prices, and I’m finding it hard to pull the trigger on bear trades.
Bull trades have their own problems. Since the start of June, sellers have quickly rejected every rally. The trend of lower and equal pivot highs doesn’t give the confidence needed that the next ascent can go the distance. And so, we’re stuck waiting for a catalyst. Something that will end the stalemate by creating enough spark for a price breakout. Until then, I think trades in airliners are higher risk.
Let’s take a closer look at the chart of JBLU stock to identify which price levels to watch.
JBLU Stock Price Levels
The nice thing about a trading range is we have clear levels to trade around. On the topside, Jetblue has found resistance near $11.60. That’s the ceiling that needs to be busted before bullish trades look appealing. Support lies around $9.90 and has halted the previous two selloffs. For bearish ideas to flourish, we need to breach this level. Until either event happens, I think traders should take a wait and see approach with JBLU shares.
Earnings are scheduled for Tuesday morning before the market open. The numbers could create some excitement in the stock, but if the recent reactions to American Airlines (NYSE:AAL), Southwest Airlines (NYSE:LUV), and Delta are any indication, it will be unlikely to change the trajectory of Jetblue’s movement.
Tyler Craig is a member of the Chartered Market Technician’s Association and holds the CMT designation. His entire adult life has been dedicated to helping individuals learn how to trade as an elite instructor and personal mentor. To join his team and the best trading community on the planet, click here. At the time of this writing, Tyler didn’t hold positions in any of the aforementioned securities.
