Seeking High Fliers
Just as Aetna whacked the HMO sector
this week, bad news from the No. 1 airline Wednesday gave the carrier stocks a
haircut. Now it’s time to look for character in the face of adversity.
United Airlines parent UAL Corp.
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warned that earnings will fall short of Wall Street expectations for the
remainder of the year. The stock gapped down and fell 5 15/16 to 53 5/16 on more
than triple average volume. Shares closed near the low of the day, raising the
odds of further selling on Thursday.
The major airlines fell
in sympathy. Analysts countered that United’s problems were unique to the
company. And by the close, the market appeared to side with that view. As
someone who seeks long bases for intermediate-term trades, I particularly like
the charts of American Airlines parent AMR.
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PowerRating) and Southwest Airlines
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AMR reported operating net of $1.75 a
share for the second quarter vs. analyst expectations of $1.57, according to
First Call/Thomson Financial.
The stock fell to a session low of 30,
then bounced of its 50-day moving average to recover most of the day’s losses
and conserving the bulk of the gains from a sharp two-week advance. The stock
needs to consolidate and clear its mid level of 32 1/2 before becoming worthy of
consideration for intermediate-term momentum trades.
Southwest opened at 22 3/8, just short
of its May 9 high of 22 3/4, sold off on nearly three times its usual trade,
losing 7/16 to 21 1/2 and closing near the low of the day. From here, we need to
see the stock find support off the session low, then consolidate on a volume and
volatility contraction, a signal that shareholders are sitting tight rather than
looking for the exits.
Delta Air Lines
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PowerRating) looks more
troublesome. The stock shed 3 7/8 to 53 5/8 on more than double normal volume,
erasing past session gains. Lots of volatility, and little to show for the past
two weeks.
