During Monday's "Mad Money" program Jim Cramer told viewers that as travel picks up that's good news for the airlines and cruise lines. Cramer recommended keeping it simple with Southwest Airlines (LUV) .
Let's check on the charts to see if we should board now or later. In our review of July 22 we wrote, "LUV has lost ground since early April and it does not look like the correction is over with a $46 price target on the weekly Point and Figure chart. I would stand aside for now and wait and see how things play out as traders seem to be more negative than management."
In this updated daily bar chart of LUV, below, we can see that prices have continued to work lower the past month. Prices are trading below the declining 50-day moving average line and the cresting 200-day line. Notice the bearish dead or death cross of the 50-day and 200-day lines earlier this month. The On-Balance-Volume (OBV) line has continued to weaken and it continues to suggest that sellers of LUV are more aggressive. The 12-day price momentum study shows higher lows from June to August, telling us that the pace of the decline is slowing, but this bullish divergence has still not generated a price recovery.
In this weekly Japanese candlestick chart of LUV, below, we see a bearish picture. Prices are trading below the cresting 40-week moving average line. In recent weeks we can see a number of upper shadows, telling us that traders are rejecting prices above $50. The weekly OBV line is pointed down and the MACD oscillator is bearish.
In this daily Point and Figure chart of LUV, below, we can see the software is projecting a downside price target in the $43 area.
In this weekly Point and Figure chart of LUV, below, we see a $46 downside price objective. Better than the daily chart.
Bottom line strategy: The fundamental story for LUV may be improving but the technical picture is still pointed lower. Let's wait for the charts to bottom and improve before going long LUV.
