If you haven’t been near a TV or been online, the airlines have been in the headlines today.
First came news that Southwest Airlines (LUV) apparently used unapproved parts for repairs on some of its jets. Then U.S. Airways (LCC) announced that it’s raising its checked bag fees. Ironically, not charging baggage fees has been one of Southwest’s major selling points.
I dug into the sector a bit and was surprised to find that the charts for a few of the sector’s major players are being impacted by their 200-day moving averages.
Believe it or not, the sector itself has been one of the strongest performers of the past couple of months. The Claymore Airline Index ETF (FAA) is up more than 40% off its June bottom, and has outperformed the broader market during that period.
But back to the 200-day. Let’s look at a few charts that showing how the 200-day is throwing some turbulence at some of the key airline stocks.
Delta Air Lines (DAL) could be breaking out of the shackles of its 200-day, a trendline that has beaten the shares back three times in the past four months.
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AMR Corp. (AMR) has some work to do before it breaks free of its 200-day. Note how the trendline marked a peak earlier this month.
UAL Corp. (UAUA) is in a similar position to AMR, although the 200-day has yet to reject any serious advances by the stock.
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How about U.S. Airways (LCC)?
Today’s news didn’t hurt the stock one bit, as the shares soared 9%. But that is bringing them in range of their 200-day moving average. The shares haven’t been close to this trendline since February.
To be sure, not all airline stocks are dueling with their 200-days. I’ll throw Southwest Airlines (LUV) out there as an example.
The stock is a fraction lower today, which keeps the equity clinging to its 20-day moving average. The shares powered through the 200-day in late July amid a 50% rally from late June to early August. That leaves the 20-day as the trendline du jour.
Airline stocks have been on a nice run, but the sector is looking tired as several of the major players head into key chart resistance.
The fundamentals remain weak, with depressed passenger volume and reduced pricing crimping the bottom line. Raising baggage fees may help a bit, but carriers such as LUV that resist the temptation for this low-hanging fruit may be rewarded in the long run with more customer loyalty.
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