Trading the Friendly Skies of Airlines Stocks
To say that shares of AMR Corporation (AMR), the company that runs American Airlines, are in a bear market would be putting it mildly. AMR has been trading in bear market territory since February 2011, and is a mere shadow of the stock that was trading above $35 in 2007.
That said, word that American Airlines would be doing what many other airlines companies did years ago – declare bankruptcy and reorganize – was met with a passion rarely seen in a stock that appeared forgotten if not yet gone. Traders sent the stock lower by more than 70% and down to fresh long-term lows.
At the same time, AMR’s rivals are soaring. While finishing off their highs, shares of US Airways Group (LCC) gained more than 4%, closing higher for a third session in a row. United Continental Holdings (UAL), also up for three straight sessions, gained more than 6%. And shares of Jetblue Airways Corp (JBLU) bounded higher by more than 10%, closing at their highest level in nine days.
Traders may want to pay particular attention to Jetblue Airways. In addition to rallying for three days in a row, the stock has closed in overbought territory below the 200-day moving average. The last time JBL finished in overbought territory, part of a four-day stretch at overbought levels in the first half of October, the stock reversed to close lower for three out of the next five trading days, losing more than 6%.
As such, traders need to be on the lookout for potential short sales should stocks like JBLU and US Airways, which is also overbought in bear market territory ahead of trading on Wednesday, continue to move higher. Additional short term strength here could easily bring sellers off the sidelines looking to take advantage of the sector’s persistently downward trend.
The stocks in today’s report were drawn from the data and research available through The Machine. To find out more, click here.
David Penn is Editor in Chief of TradingMarkets.com