✈️ Delta Air Lines: Pre-Covid levels in sight ✈️
Scanning through higher time frame charts,
DAL
caught my attention. The stock has been beaten down with the whole industry due to the Covid pandemic. Shares sold off heavily in February and March 2020, dropping about 70% from pre-Covid levels. Bottom was established on 14 May las year at $17.51. Since then though, the stock has been in a relatively clean up-trend, with higher lows and higher highs clearly established along the way.
In addition, last week's close confirmed a continuation pattern by breaking out from a bull flag. Probabilistically speaking, this is a very potent setup, especially as the flag formed over a period of two months.
Be cautious of resistance around $45 as this level served as multi-year support in 2017 and 2018 and has not yet been tested from the downside after it was broken in March last year. I expect prices to at least stall at this level before we get a continuation to the upside. Next reference point is the $55-57 zone, which is the unfilled gap from last week of February 2020. I expect this gap to act as resistance, however if it starts filling up, prices might move through it quickly.
So the technical view is clear. How about fundamentals?
Delta was the first major airline to report Q4 earnings earlier this year. There was definitely more optimism compared to several large competitors. But I'm conscious that might have been due to the holiday travel spike and the fact they reported to shortly after. Anyhow, sentiment and market perception seems to be more positive than competitors who reported later or are yet to report.
There has been lots of talk about the middle seat policy. The policy was widely rolled out almost a year ago in order to prevent Covid transmissions through social distancing measures. However as other airlines have started to unblock the middle seat rule, this policy is mostly perceived as a demand indicator. And the fact that Delta extended the middle seat rule on 8 February can be viewed as lack of demand. However they did only extend for 1 month, which is less than previous extensions. This suggest that we're getting close to a point where demand will be strong enough to warrant unblocking the middle seat. And when that happens, expect it to serve as a strong catalyst for he stock price.
In the end of January, the company announced that they're bringing back 400 pilots. Granted, this is only a small portion of it's 12,000 pilots. But still it's well ahead of when Delta originally estimated they would be able to convert pilots back to full flying status. And it shows their confidence in the projected recovery going into summer season.
📝 Summary 📝
I'm confident to recommend a buy position in Delta Air Lines based on both technical and fundamental reasons described above. Stay mindful of the $45 and $55 resistance levels and watch out for updates on the middle seat policy.
DAL
caught my attention. The stock has been beaten down with the whole industry due to the Covid pandemic. Shares sold off heavily in February and March 2020, dropping about 70% from pre-Covid levels. Bottom was established on 14 May las year at $17.51. Since then though, the stock has been in a relatively clean up-trend, with higher lows and higher highs clearly established along the way. In addition, last week's close confirmed a continuation pattern by breaking out from a bull flag. Probabilistically speaking, this is a very potent setup, especially as the flag formed over a period of two months.
Be cautious of resistance around $45 as this level served as multi-year support in 2017 and 2018 and has not yet been tested from the downside after it was broken in March last year. I expect prices to at least stall at this level before we get a continuation to the upside. Next reference point is the $55-57 zone, which is the unfilled gap from last week of February 2020. I expect this gap to act as resistance, however if it starts filling up, prices might move through it quickly.
So the technical view is clear. How about fundamentals?
Delta was the first major airline to report Q4 earnings earlier this year. There was definitely more optimism compared to several large competitors. But I'm conscious that might have been due to the holiday travel spike and the fact they reported to shortly after. Anyhow, sentiment and market perception seems to be more positive than competitors who reported later or are yet to report.
There has been lots of talk about the middle seat policy. The policy was widely rolled out almost a year ago in order to prevent Covid transmissions through social distancing measures. However as other airlines have started to unblock the middle seat rule, this policy is mostly perceived as a demand indicator. And the fact that Delta extended the middle seat rule on 8 February can be viewed as lack of demand. However they did only extend for 1 month, which is less than previous extensions. This suggest that we're getting close to a point where demand will be strong enough to warrant unblocking the middle seat. And when that happens, expect it to serve as a strong catalyst for he stock price.
In the end of January, the company announced that they're bringing back 400 pilots. Granted, this is only a small portion of it's 12,000 pilots. But still it's well ahead of when Delta originally estimated they would be able to convert pilots back to full flying status. And it shows their confidence in the projected recovery going into summer season.
📝 Summary 📝
I'm confident to recommend a buy position in Delta Air Lines based on both technical and fundamental reasons described above. Stay mindful of the $45 and $55 resistance levels and watch out for updates on the middle seat policy.