Are airline stocks about to takeoff? We know the play on words may be somewhat tired—the charts, however, are anything but. According to my analysis, there’s good reason for shareholders to buckle up ahead of an expected ascent – and Jim Cramer agrees, saying fundamentals confirm the outlook.
Delta Airlines (DAL)
Although shares have marched lower since early June, I believe Delta may have bottomed out and is ready to move higher.
Looking at the chart, you can see that Delta was just below $35 in early July. About a month later, Delta re-tested that low, and it held. That’s a bullish development. At the same time, the stock was trading above its 50-day moving average, which is a very positive sign for most chart watchers. Additionally, the Moving Average Convergence Divergence line, or MACD, an indicator that helps technicians predict changes in a stock’s trajectory, made a bullish crossover. That too, is positive.
All told, there’s every reason to believe Delta is going up, up, up. Trend lines suggest that Delta could hit $42 or more.
American Airlines (AAL)
Take a look at American’s daily chart, and you’ll see it appears to have bottomed earlier this month. You’ll also see that American has the same bullish MACD crossover as Delta. Although those patterns suggest an advance, American faces resistance at $43, and because of the potential ceiling, it’s not my favorite within the group.
Southwest Airlines (LUV)
As I noted above, airlines were getting hammered earlier this summer – but the same was not exactly true for Southwest. It had a couple of gentle pullback to its 50-day moving average, but after each pullback, the stock immediately rebounded higher. That’s a bullish trend. Volume on up days has been very strong, a classic sign of institutional sponsorship. And just like Delta and American, the MACD is also bullish for Southwest.
All told, there’s a lot to like. However, there is a caveat. Southwest is trading at all-time highs, and pros don’t like to chase stocks. Instead, I think you should wait for another pullback (down to the 50-day moving average). Lately that’s been a strategic point of entry.
Spirit Airlines (SAVE)
In my opinion, Spirit has the best chart of the entire group. The uptrend, which has been rolling since May, is still completely intact. At the same time, the MACD is flashing a bullish crossover, and in late July, when the stock pulled back, it bottomed above the 50-day moving average. That, too, is bullish.
However, like Southwest, you shouldn’t chase this stock – it’s doing too well. Instead, wait for another dip, perhaps down to $66 or $67, and use that as your point of entry.
Hawaiian Airlines (HA)
As you can see from the chart, Hawaiian Airlines fell off a cliff in early June, but over the last 6 weeks, trends have reversed and Hawaiian has broken above a former level of resistance around $15. Just like the other airlines, Hawaiian’s MACD made a bullish crossover a week ago, and its Relative Strength Index, or RSI, has also been making higher lows – another bullish sign. Given the trendlines and the stock’s ability to pierce resistance, I can see Hawaiian pushing toward former highs around $16.50.
During Mad Money, Jim Cramer echoed my enthusiasm for the sector.
“On the fundamental side, these companies benefit dramatically from declining oil prices,” Cramer noted. “At the same time, we know from their recent earnings reports that load factors continue to rise and business travel is increasing versus previous quarters.”
