What do you do when the trend is actually no trend? Here are some ideas for the airline sector. (March 26, 2015)
Lets look at the airlines, ultimately I’m going to get to one specific one that I think is looking good. First of all look at Southwest Airlines ( NYSE:LUV ); all of these are in uptrends but this one has been in consolidation, a broken-down squeeze. The stock did not follow through, now it’s just at support. So this is one of those where there is just literally nothing to do except watch it. You watch it, see the stock is again is in an uptrend, but it really doesn’t have much momentum. Why would I say that? Well look specifically and closely at the direction of the 50-day moving average; it’s basically for all intents and purposes, trading sideways.
Okay, Alaska ( NYSE:ALK ), kind of a similar drift in that it’s just trading sideways. This is a stock that you can buy on the bounce; you keep a stop just below say this level and look for a short move on this. The stock is in an uptrend but it’s really, really choppy. I don’t think this is your best trade, it’s a trade, this is a short-term low, that’s what I see; it’s a short-term low after about three days or so of a pullback. Look at Delta Airlines ( NYSE:DAL ), similar thing but here this stock is really drifting a bit lower. Do you see what I mean? Yes you do.
Now, when all of the airlines don’t line up that’s telling you that it’s not as if there’s money coming in indiscriminately, rather, money is kind of going out selectively, which takes me to this one, Spirit Airlines ( NASDAQ:SAVE ). Here the stock has been drifting sideways for a while but it’s finally just today falling back to the 200-day moving average and bouncing. So the idea is this, on this stock you look at the 200-day moving average, you look at the low of 71.28, the 200-day moving average, 71.42.
So really what I would suggest doing is, take a little bit of this stock now. I’m not even really sure you need to go clear down to 70.00 to find a reference for your stop. When I think about it that’s about a 5 percent stop, so you can put your stop just a little bit below $70.00. But my be is that you’re buying this stock now, you’re going to get the stock to drift up a little bit, and then you’re off to the races, and then you wait to see what happens when it’s back to 80.00. If it starts rolling over again then you sell it, you lather, rinse, repeat, because it’s worked well the last few times that’s happened; and that’s an 8 or 10 percent return in a fairly short period of time.
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