• Subscribe
  • Log In
  • Home
  • Daily Diary
  • Asset Class
    • U.S. Equity
    • Fixed Income
    • Global Equity
    • Commodities
    • Currencies
  • Sector
    • Basic Materials
    • Consumer Discretionary
    • Consumer Staples
    • Energy
    • Financial Services
    • Healthcare
    • Industrials
    • Real Estate
    • Technology
    • Telecom Services
    • Transportation
    • Utilities
  • Latest
    • Articles
    • Video
    • Columnist Conversations
    • Best Ideas
    • Stock of the Day
  • Street Notes
  • Authors
    • Bruce Kamich
    • Doug Kass
    • Jim "Rev Shark" DePorre
    • Helene Meisler
    • Jonathan Heller
    • - See All -
  • Options
  • RMPIA
  • Switch Product
    • Action Alerts PLUS
    • Quant Ratings
    • Real Money
    • Real Money Pro
    • Retirement
    • Stocks Under $10
    • TheStreet
    • Top Stocks
    • Trifecta Stocks
  1. Home
  2. / Investing
  3. / Transportation

Higher Oil Prices Are Disrupting Airlines

While the indicators for American Airlines are all still bullish, there are several red flags.
By TIMOTHY COLLINS
Mar 17, 2016 | 02:15 PM EDT
Stocks quotes in this article: AAL, DAL, UAL, LUV, JBLU

What to make of rising oil? I'm amazed to see the trucking names breaking out across the board. JB Hunt Transport Services (JBHT), Old Dominion Freight Line (ODFL), Landstar (LSTR), Echo Global Logistics (ECHO), Marten Transport (MRTN) and Saia (SAIA) are all rolling higher this morning, pushing past resistance on their daily charts.

While I worry a bit about what rising oil prices can do, the negative correlation between oil and truckers hasn't been as big nor as consistent as with airlines. Don't get me wrong, in the long-term picture, it is still a jagged relationship, but airlines worry me more here. And not just one airline, but the entire group.

For instance, look at American Airlines Group (AAL), which has had a great last month and really isn't that far off the highs of the winter. While the indicators are all still bullish here, there are several red flags. First, the trend is waning. Both the slow stochastics and commodity channel index (CCI) have rolled over. I tend to look for a short setup or pullback when the 8,5 slow stochastics crosses over bearish, especially when it happens at or above the 80 overbought area, which we have here. Second, when the CCI dips below 100 for a second time in short succession, I expect a pullback. We have our second dip in the last month and that looks like trouble to me. Furthermore, we have a bearish divergence in momentum. The RSI made a lower high when price moved higher. This is a major concern for me as well.

While not everything is bearish here, AAL looks like a neutral at best or possibly a hedge against a long portfolio. If I were going to trade it alone on the short side, I would set my stop somewhere in the $43 to $44 area, depending on the size and my risk tolerance.

Of the big three, United (UAL), Delta (DAL) and AAL, the latter is the worst-looking name in the group. DAL actually looks the best and I would put UAL pretty close behind AAL in terms of risk. If I were going to pair them up, I would be long DAL and short the other two. Regional names are mixed, with Southwest (LUV) resembling UAL a little more than DAL, but really right in the middle, and JetBlue (JBLU) falling way out of bed before any of the others.

Given the momentum we're seeing in oil, now is the time to inspect transportation names like airlines and make certain you have alerts, hedges or a full understanding of your risk should oil continue higher.

Get an email alert each time I write an article for Real Money. Click the "+Follow" next to my byline to this article.

At the time of publication, Collins had no positions in the stocks mentioned.

TAGS: Investing | U.S. Equity | Transportation

More from Transportation

Old Dominion Freight Line Is Ready to Roll Again

Bruce Kamich
Jun 28, 2022 11:15 AM EDT

Here's what traders could do now.

Southwest Airlines Upgraded But the Charts Didn't Get the Memo

Bruce Kamich
Jun 23, 2022 1:35 PM EDT

Let's take a look.

Will FedEx Deliver? Checking the Charts Ahead of Earnings

Bruce Kamich
Jun 23, 2022 12:17 PM EDT

Here's our plan.

Winnebago's Numbers Were Awesome: Here's How to Go Along for the Ride

Stephen Guilfoyle
Jun 22, 2022 11:00 AM EDT

Here's my trading strategy for investors right now.

Why It Costs $1B Per Year to Go Up Against Indonesia's GoTo Group

Alex Frew McMillan
Jun 22, 2022 6:30 AM EDT

It's not often you find a tech stock with defensive characteristics and a strong upside, but GoTo offers both.

Real Money's message boards are strictly for the open exchange of investment ideas among registered users. Any discussions or subjects off that topic or that do not promote this goal will be removed at the discretion of the site's moderators. Abusive, insensitive or threatening comments will not be tolerated and will be deleted. Thank you for your cooperation. If you have questions, please contact us here.

Email

CANCEL
SUBMIT

Email sent

Thank you, your email to has been sent successfully.

DONE

Oops!

We're sorry. There was a problem trying to send your email to .
Please contact customer support to let us know.

DONE

Please Join or Log In to Email Our Authors.

Email Real Money's Wall Street Pros for further analysis and insight

Already a Subscriber? Login

Columnist Conversation

  • 07:34 AM EDT PAUL PRICE

    A $525,000 Vote of Confidence on Macerich (MAC)

  • 09:49 AM EDT JAMES "REV SHARK" DEPORRE

    This Weekend on Real Money

    Stop Wishing, Hoping, and Praying and Take Control...
  • 07:59 PM EDT PAUL PRICE

    Very Good Quarterly Numbers From Bassett Furniture (BSET)

    Bassett Furniture blew right through analysts es...
  • See More

COLUMNIST TWEETS

  • A Twitter List by realmoney
About Privacy Terms of Use

© 1996-2022 TheStreet, Inc., 225 Liberty Street, 27th Floor, New York, NY 10281

Need Help? Contact Customer Service

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

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.

FactSet 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.

Compare Brokers

Please Join or Log In to manage and receive alerts.

Follow Real Money's Wall Street Pros to receive real-time investing alerts

Already a Subscriber? Login