American Airlines is one of the weakest carriers based on EPS (-$5.26) and negative debt-to-equity levels. AAL even lost money in the fourth quarter of 2020 which is when air traffic had somewhat stabilized.
Smart bears like to pick on the weak, and AAL certainly fits into that category with a steady multi-month downtrend already in place.
Bulls at this time would try to throw out TA and argue that vaccinations will lead to a recovery in air traffic which will lift AAL back to profitability.
This sort of analysis is always perilous because it's subjective and assumes the market has not already accounted for the (likely surface level) analysis that you've done.
Additionally, there is a headwind that hasn't yet been covered much in the media: the issue of the anti-vaxxers. More than 40% of Americans claim they will refuse to take the COVID vaccine (various surveys), and most of them are paranoid and siloed off from the mainstream media, so any type of "education" is unlikely to reach them. If we don't even get close to 90% vaccination rates by the end of the year - the level Dr. Fauci said is needed for herd immunity - then some of the assumptions AAL priced in may be incorrect, and perhaps the downtrend is the market already realizing this. Waves of COVID variants spreading among the unvaccinated could significantly derail AAL's recovery prospects.
Really, this is all to say just go with the trend, and that trend is down despite SPY rallying to all time highs with 8 straight days of up auction. Vaccine & COVID surprises, if any, are more likely to be skewed towards the downside at this time.
Short with confidence.
Targeting the 200 Day EMA (around $18) and then, ideally, the 0 fib ($14).
Smart bears like to pick on the weak, and AAL certainly fits into that category with a steady multi-month downtrend already in place.
Bulls at this time would try to throw out TA and argue that vaccinations will lead to a recovery in air traffic which will lift AAL back to profitability.
This sort of analysis is always perilous because it's subjective and assumes the market has not already accounted for the (likely surface level) analysis that you've done.
Additionally, there is a headwind that hasn't yet been covered much in the media: the issue of the anti-vaxxers. More than 40% of Americans claim they will refuse to take the COVID vaccine (various surveys), and most of them are paranoid and siloed off from the mainstream media, so any type of "education" is unlikely to reach them. If we don't even get close to 90% vaccination rates by the end of the year - the level Dr. Fauci said is needed for herd immunity - then some of the assumptions AAL priced in may be incorrect, and perhaps the downtrend is the market already realizing this. Waves of COVID variants spreading among the unvaccinated could significantly derail AAL's recovery prospects.
Really, this is all to say just go with the trend, and that trend is down despite SPY rallying to all time highs with 8 straight days of up auction. Vaccine & COVID surprises, if any, are more likely to be skewed towards the downside at this time.
Short with confidence.
Targeting the 200 Day EMA (around $18) and then, ideally, the 0 fib ($14).
Trade active