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Are airline stocks about to takeoff? We know the play on words may be somewhat tired—the charts, however, are anything but.
According to analysis from Bob Lang, the founder and senior strategist at ExplosiveOptions.net, there's good reason for shareholders to buckle up ahead of an expected ascent.
And Jim Cramer says fundamentals appear to confirm the outlook. Details follow:
Although shares have marched lower since early June, Lang believes Delta may have bottomed and is ready to march higher.
Looking at the chart, he notes that Delta made a low in early July just below $35. About a month later, Delta re-tested that low and it held. That's a bullish development.
At the same time, Lang says the stock is now trading above its 50-day moving average, which is a very positive sign for most chart watchers.
And Lang says 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, Lang says there's every reason to believe Delta is going up, up, up. Trend lines suggest to him, Delta could print $42 or more.
Looking at the daily chart, Lang says American appears to have bottomed earlier this month. Lang also points out that American has the same bullish MACD crossover as Delta.
Although those patterns suggest an advance, Lang also noted that American faces resistance at $43. Although he skews positive, because of the potential ceiling, it's not Lang's favorite within the group.
When the other airlines were getting hammered earlier this summer, Lang noted that Southwest 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.
Also Lang says the volume on up days has been very strong; that's 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. Instead, Lang thinks you should wait for another pullback down to the 50-day moving average; he says, lately that's been a strategic point of entry.
In Lang's opinion, Spirit has the best chart of the entire group. He says the uptrend, which has been rolling since May, is still completely intact. At the same time, he says, the MACD is flashing a bullish crossover.
Also Lang noted that 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. In Lang's view, you should wait for another dip, perhaps down to $66 or $67 as a point of entry.
As you can see from the chart, Hawaiian Airlines fell off a cliff in early June. However, over the last 6 weeks, trends have reversed with Hawaiian breaking 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, which is also bullish.
Given the trendlines and the stocks ability to pierce resistance, Lang can see Hawaiian pushing toward former highs around $16.50.
Jim Cramer shares Bob Lang's enthusiasm for the sector. "On the fundamental side, these companies benefit dramatically from declining oil prices. 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," Cramer said.
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