I'm not sure if the airports are a mess or the airlines are a mess right now. Maybe it is a bit of both but flying has certainly lost any joy for those I know. Getting giant scraps of titanium, steel, and aluminum in the air is absolutely amazing. Everything in between has been less than amazing.
As you probably know by now, Southwest Airlines (LUV) recently warned about its third quarter, blaming the rise in COVID-19 because of the Delta variant. Yes, I know it is ironic that the Delta impacting Southwest is not actually their Delta competitor. Cancellations have increased and Southwest is allowing for credits and rebookings, which is great for customer service but not so great for the bottom line. The most amazing thing is this change has worsened significantly in the past three to four weeks. August sales are expected to be lower by 15% to 20% after a July that fell in-line.
In terms of what I'm seeing and hearing from those traveling, there are quite a few cancellations of flights. In the past week alone, I've felt it firsthand on Southwest and JetBlue (JBLU) . From my view, airlines are having to condense flights to fill them because of cancellations. It almost seems like they would be just as well to leave the middle seats empty in an attempt to get less cancellations.
Looking at the weekly chart of Southwest, there's a big risk that the sideways movement of the last month is a bear flag. On the plus side, the company warned, and the stock has hung in there. On the negative side, there's resistance right around the current $51. Plus, the 10-week simple moving average (SMA) sits at $52.63, about two dollars higher than the current price.
We do see oversold signs in the Full Stochastics and StochRSI, but the Full Stochastics bounce appears to be failing. If that rises back above 20 with the price going over $52.50, then LUV becomes a buy with a target of $54, then $57 and a stop of $50. If the Full Stochastics fails, remember that oversold can stay oversold. Price going below $50 on a weekly close should take us back to the $42 to $44 area.
There's nothing to do on this one today, but we have triggers around the corner. Patient traders should wait for one to fire, then make a move.