But according to Ross' chart work, the recent breakdown is not as bad as it appears, as the index is nearing a key technical level on the chart. "Pay attention to this 200-day moving average, which comes in around $94," said Ross, head of technical analysis at Evercore ISI. "And don't be scared if the index breaks below that level."
The XAL has been above its long-term 200-day moving average since October, when the index fell to a 52-week low and subsequently rallied 50 percent in the three months to follow. And Ross suspects that if the XAL were to fall below that 200-day moving average, we could see a similar fate. "Often times we see a false breakdown, where prices break below a key level and then break back above just as fast," said Ross. "I think that's what might unfold here in the airlines."
Ross added that the XAL has a very strong support at the $92, which could be the area to buy if we see a test of that level.
"Give the airlines a little more room" to the downside and then expect a bounce, said Ross.