A Look at Strength in Airlines Delta DAL and Continental CAL

Dec 3, 2009: 1:36 PM CST

A reader pointed out to me that there has been three days of strength in some of the major US Airline stocks including Delta Airlines (DAL) and Continental (CAL) and to a lesser degree in other airlines.

I wanted to take a look at these stocks to highlight this strength and the overhead resistance levels that – if cleared – would be quite bullish indeed for airlines in general as we are in the midst of a holiday travel season.

First, Delta Airlines (DAL):

I wasn’t aware that Delta Airlines had almost doubled from its June 2009 lows under $5.50 per share to the recent $9.75 highs in September, and that’s impressive.  That occurred with the price of crude oil rising during the same period.

Delta has more than doubled (up almost 200%) after touching a low of $3.50 in March.

The point of interest now is the four-day price surge from $7.50 to today’s (almost) $9.50 highs… which is contacting overhead resistance from the prior October swing highs at $9.25.  A doji is forming mid-day on Thursday, and that’s short-term bearish, arguing for at least a pause if not some sort of retracement slightly lower.

A break above $9.50 would likely catapult price back to the $9.75 level, and any close above $10.00 would be an ultra-bullish fresh 2009 high – keep your eye on that going forward.

Next, Continental Airlines (CAL):

Unlike Delta, Continental actually made a (slight) new 2009 high in October above $17.50 per share, and price is currently $1.50 below that level with no (major or obvious) overhead resistance until the $17.00 level.

Still, like Delta, price is forming a doji (so far) above the upper Bollinger Band which – generally – is not a buy signal but a ‘take profits’ or even an aggressive ‘sell short’ signal for most traders.

I think it’s worth watching these stocks (or trading them if you are so inclined) to see clues into the broader transportation sector which gives a glimpse into a segment of economic activity.

If airlines are strongly breaking to fresh 2009 highs, that’s bullish for transportation and hints that investors are comfortable with the economy going forward.

Corey Rosenbloom, CMT
Afraid to Trade.com

Follow Corey on Twitter:  http://twitter.com/afraidtotrade

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