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Watching the Airline Stocks

by: Trader Mark August 27, 2008 | about stocks: AMR / CAL / DAL / LCC / LUV / NWA / UAUA    
Trader Mark

Trader Mark

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The darlings of the market just a few weeks ago, the airline stocks are now down 25-40% in a matter of 2 weeks from their peaks. These make for excellent hedges if you think oil is headed to sub $100 but even with a $10 spike in oil these stocks have cratered. Risky business. Interestingly all the charts look identical - and the stocks are now all at the 50 day moving average. One sample chart

Ironically, my sarcastic post literally called the top... to the exact day. [Aug 19: Best Stock on the Planet: UAL] The question will be, will this support level hold? With hurricane Gustav causing hedge fund computers to go into overdrive and buy all the natural gas stocks they've been selling relentlessly for 2 months, it's probably too early, but I am still keeping these on the radar (sorry could not resist) in this "trading market" where what is awful one week is the market's favorite 3 weeks later. With the hurricane being "priced in" by Friday/next Tuesday, I'd expect the quantitative hedge funds to start selling off all these nat gas stocks they are buying now for a quick gain, and then return to the normal trend. We'll see. If it works out that way, then they will rotate into the airline stocks - and so we go in the current era of "investing".

UAUA down 33% from peak
AMR down 38% from peak
DAL down 25% from peak
NWA down 30% from peak
CAL down 26% from peak

Keep it mind "peak" was two weeks ago or less for these "playthings" of the hedge funds.

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This article has 2 comments:

  •  
    Aug 27 10:53 PM
    The airlines stocks are like DUG multiplied by 10. They trade 100% on oil without ay regard for the airlines business itself. I owned UAUA at $6, sold at $8 for a quick trade. The business is not viable as it is long term with $100 + oil. UAUA continued on to $14. Unbelievable. Every time oil moves $1, airlines move 20%.
    Reply
  •  
    Aug 29 07:02 AM
    Of course the airlines will always be viable. Their main problem is too much competition. We will never go back to the horse and buggy or even the train.

    Also I expect oil will drop far lower than $100. Few if any developing countries can afford $100 and demand will continue to drop.
    Reply
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