A Small-Cap Transport Has Daylight Ahead

 | May 07, 2013 | 5:00 PM EDT  | Comments
  • Comment
  • Print Print
  • Print
Stock quotes in this article:

fly

Earnings season is winding down, and this means short-term investors can begin to breathe once again. Holding positions through earnings can be a harrowing experience, and many traders (myself included) generally prefer not to unless we're in them for the long term.

As companies report, however, they offer a chance for a fresh perspective on short and near-term positions without the risk of the extreme adverse moves that can be triggered when investors do not care for what they hear. One poignant example of this was last week's earnings release from LinkedIn (LNKD).

One company in particular has caught my attention recently is Fly Leasing (FLY). Late last week, Fly Leasing reported a profit of $1.15 for the quarter, up from $0.78 year over year. Revenue, meanwhile, rose to $114.4 million, from $9.9 million. The airline industry can be a tough sector to be in, as companies are often saddled with large amounts of debt, but Fly Leasing has made strong inroads in decreasing that debt (down $70 million this past quarter alone).

Fundamentals aside, Fly Leasing has been cleared for takeoff on the technical side. The stock had been in a multi-year congestion that lasted from 2011 into this year, but it broke free in February and March of this year and rose sharply. Over the past six weeks, the stock has fallen into another period of congestion.

FLY Monthly
TradeStation

This time, the pause is on the daily time frame. The monthly breakout was assisted by favorable volume. As Fly Leasing's stock based, volume dropped. This indicates a lack of participation by the bears, and it enhances upside breakouts. The volume confirmed this, as it increased with the monthly breakout. This same development in volume is now playing out on the daily charts as well.

FLY Daily
TradeStation

Although in this case the volume is a strong factor, the momentum or pace of the monthly breakout also suggests that this is just the beginning of the upside move on the larger time frame. The daily rally earlier this year would not have been exceptional had this been any other stock. The average daily range throughout the rally was average to only slightly above average. On the weekly chart, however, the move is much stronger than the overall rally from 2009 into early 2011 that came before the 2011-2012 trading range. This suggests that further upside will continue to perform well.

Fly Leasing also faces very little immediate overhead resistance on the monthly time frame. The most notable levels will be $19.50 and $22. The levels of weekly resistance prior to the $22 zone should last for only three or four months before the trend continues. Boeing (BA) experienced similar monthly development and is worth following as well for further buying as the year progresses.

Columnist Conversations

Lang:
While last week was a day to pull the plug and contemplate where the market was headed, I waited for some conf...
Shares of TSLA have formed multiple hammer candles at a key level of support defined by: the September head an...
But it surely can rent both. Leaving the wisdom of real estate agents aside... sometimes it's better to rent t...
Barron's cover story about oil going to $75 / barrel seems forgotten as oil giant XOM just hit a new 52-week h...

BEST IDEAS

REAL MONEY'S BEST IDEAS

Columnist Tweets

BROKERAGE PARTNERS

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data provided by Interactive Data. Company fundamental data provided by Morningstar. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by Interactive Data Managed Solutions.


TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

IDC calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.