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Backing up the truck on airlines right here
- Thread starter pandabear
- Start date
29 May 2008 07:35 EDT
DJ TECHNICALLY SPEAKING: Airline Stocks' Descent May Continue
By Rob Curran
Of DOW JONES NEWSWIRES
(This article was originally published Wednesday)
NEW YORK (Dow Jones)--Even the contrarians can't make a case for buying airline stocks.
After months of selling, airlines are now moving tick for tick with oil prices and some popped sharply when the commodity futures slid earlier. But those who monitor the charts say stocks falling this fast usually struggle to pull out of their nosedive.
The AMEX Airline Index, or XAL, which tracks a fleet of carriers, including American Airlines parent AMR (AMR) and budget carriers like Southwest Airlines (LUV) and Ryanair Holdings (RYAAY), is down 64% year to date and about a dollar from its nadir of 17.89, trading Wednesday around 18.50.
"It's priced as if there is no airline industry left...They're all priced for extinction," said a trader at a mid-sized Wall Street firm.
AMR recently traded around $6.80, not far from its 52-week low of $6. Could it go lower? In 2003, after terrorist attacks had slowed air travel, shares traded as low as $1.25.
Technical analysts often look for "countertrend" opportunities, using the charts to project a turn in stocks that are falling, or rising. But they're steering clear of airlines. In the Darwinian world of stocks, this group looks the weakest, they say.
"Not only is the XAL near all-time lows, it's also near all-time lows relative to the S&P 500, and that relative strength indicates it should continue to underperform," said Katie Townshend, chief market technician at MKM Partners.
Likewise, Marc Pado, a market strategist and chartist for Cantor Fitzgerald, says the fact that some airlines have already fallen through all previous lows is ominous. In technical analysis, prior lows are supposed to act as safety nets of support. Many of those nets are now gone.
Of course, technical analysts are not oblivious to the fundamental headwinds facing the stocks: oil prices and a weakening economy.
"Having oil for the (long term) above $130 was unthinkable a few months ago," said Christopher Altschul, president of hedge-fund firm Highlander Fund Management, which has bet against airlines in the past. "The airlines are just not structured to deal with that."
So much restructuring is needed that some fear the airlines won't be able to get it done.
"They're trying to find ways of raising prices such that they can make it more profitable," Pado said. "But the airline industry was (long) considered a luxury business. There's certain expectations that you're going to get things on a flight."
For the bears, Townshend recommends watching for opportunities to short airline stocks after sharp rallies. One method she uses is to follow "stochastics" - a measure of how far from a high/low range a stock closes each day - for signs of "overbought" conditions. So, if the stocks close consistently near their highs of the session, it could be time to go short.
The last time the stochastics flashed an overbought signal, on May 5, the XAL closed at 32.20. Going short then would have been a quick way to make a million.
The quickest way to become a millionaire, however, may be the method once outlined by Richard Branson: become a billionaire, and then buy an airline.
-By Rob Curran, Dow Jones Newswires; 201-938-5176; robert.curran@dowjones.com
(END) Dow Jones Newswires
May 29, 2008 07:35 ET (11:35 GMT)
Copyright (c) 2008 Dow Jones & Company, Inc.
If crude is going into a correction, the easiest and best (imho) are the refiners, at least you don't have to worry waking up one morning and seeing one or your airline lottery tickets filing chapter 11....
Panda, for full disclosure i've been short most of the airlines anywhere from 6 months to about a year and a half....Also long crude and nat gas, plus trade around most of the energy names. Good luck, and be nimble!
how about a list of refiners???