Bulls Bought The Dip In American Airlines And United Airlines

Bulls Bought The Dip In American Airlines And United Airlines

With the vaccine rollout ramping up, customers are returning to the air to travel. Airline stocks were beaten down during the course of the pandemic and have yet to return to the skies.

American Airlines Group Inc (Nasdaq: AAL) and United Airlines Holdings Inc (Nasdaq: UAL) are down 27% and 32%, respectively, from their February 2020 share prices, but the stocks are flashing bullish signals.

The American Airlines Chart: American Airlines opened with a small gap down Tuesday but the dip was quickly bought. Although trading lower than recently, the downturn was expected if American Airlines is to complete a bullish inverted head-and-shoulders pattern to gear up for a move into the overhead gap. The stock is trading below a resistance level at $22.58 and below both the eight-day and 21-day exponential moving averages (EMAs), which is bearish.

On Monday, American Airlines printed a green dogi candlestick, which is often found at the top or bottom of a trend. This candlestick could indicate American Airlines stock will move higher over the coming days, which would also help to verify the inverted head-and-shoulder pattern is playing out.

Bulls want to see increasing bull volume come into the stock and for it to jump up and regain $22.58 as support. If American Airlines’ stock can trade back above the support level, it has room to move to the descending neckline of the head-and-shoulder pattern. If this pattern is recognized, the stock should break through the neckline and trade back up towards the gap left back in February 2020 on pandemic news.

Bears want to see American Airlines’ stock reject resistance and fail to complete the inverted head-and-shoulder pattern. If the stock can't break up over resistance, it could fall further to the next support level at $18.94

(Click on image to enlarge)


The United Airlines Chart: Like American Airlines, United Airlines looks to be completing the right shoulder of a bullish inverted head-and-shoulder pattern. United Airlines’ stock is trading below both the eight-day and 21-day EMAs, but a move higher on Wednesday would help the stock to regain both EMAs as they are fairly close by.

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