American Airlines (AAL) broke below nearby support and the rising 50-day moving average line today. There is also a small downside gap left from today's price action. Prices made their low early in the day and are quietly creeping higher.
Sometimes breakdowns are one-day phenomena and that could turn out to the case for AAL. Let's check our charts and indicators a bit closer for clues.
In this one-year daily bar chart of AAL, above, we can see today's price action with the gap to the downside and the entire trading range for the day below the rising 50-day simple moving average line. The daily On-Balance-Volume (OBV) line generally moved higher from an early November low and really did not foreshadow a big down turn. Momentum did slow from November to December and January as prices made equal highs and momentum made lower highs.
This three-year weekly chart of AAL, above, is in "good shape" and not signaling sustained price weakness. Prices are above the rising 40-week moving average line. The weekly OBV line bottomed in June, moved up to November and then turned sideways or neutral. The Moving Average Convergence Divergence (MACD) oscillator is well above the zero line and the two moving averages that make up the indicator have narrowed. These two lines have not crossed and maybe they don't cross -- it all depends on the price action.
Bottom line: Without a period of distribution or liquidation before today's decline it is possible that today's dip does not start a big selloff. Tomorrow's price action is likely to be key and we plan to watch it closely. It will be like checking the flight departure board to see if things are on time.