Southwest Airlines (LUV) has seen a strong advance from its August low to its late February peak, but can the Action Alerts PLUS holding maintain its flight pattern or will it level off in the weeks ahead?
In this daily bar chart of LUV, below, we can see a bullish golden cross of the 50-day moving average line and the 200-day moving average line in late November, early in the stock's climb. In the past two months LUV has pulled back to retest the rising 50-day line. Prices are above the 50-day line now but its slope is beginning to flatten.
The On-Balance-Volume (OBV) line moved up strongly with prices in November but it has corrected deeply in March as shares dipped. The OBV line has moved up in recent weeks but it has not moved to a new high. Right now the OBV line suggests that prices of LUV will level off. The Moving Average Convergence Divergence (MACD) oscillator is back in a bullish configuration above the zero line.
In this weekly chart of LUV, below, we see a stronger pattern than in the daily chart. Here prices are above the rising 40-week moving average line. Prices broke out on the upside about five months ago from a two-year consolidation pattern. The weekly OBV line is positive and does not look like the daily chart. The MACD oscillator crossed in March to a take profits sell signal but could cross again to the upside in the weeks ahead.
In this Point and Figure chart of LUV, below, we can clearly see the upside breakout from the lengthy consolidation pattern as well as the recent consolidation. A trade at $60 will be a small double top breakout and will allow us to project higher price targets in the low $80s.
Bottom line: With LUV in the middle of an $8 range we could go either way. A close below $52 would be bearish. A close above $60 would be bullish. Keep checking the departure boards for the latest updates.