Over the past 10 months I have outlined the strong correlation between $WTIC and US equities in this thread: http://www.elitetrader.com/vb/showthread.php?s=&threadid=193390 Now it's time to be scaling into short positions in the airlines, for the reasons outlined previously. Best short ideas for a multi-month / multi-quarter timeframe: DAL (bad earnings report on 18 January), stock down a lot on that day RJET (stock offering at $7.80 suggests that management thought stock was overvalued at that price) UAL (relatively weak in the last 3 months) LCC (no fuel hedges; will suffer even more if oil goes over $100) Easyjet (EZJ.L): bad update today 20 January; stock down over 14% http://www.bloomberg.com/news/2011-...retax-loss-may-double-on-snow-fuel-costs.html "EasyJet Shares Slump in London After Loss Is Forecast on Fuel Costs, Snow" Ryanair (RYA.L or RYAAY): down in sympathy with EZJ JBLU SKYW AMR ("sell the news" reaction to earnings report on 19 January) Stronger stocks: LUV ALK Some other non-US airlines: GOL CEA ZNH VBA.AX QAN.AX BAY.L (about to complete merger with Iberia)
Useful references: Jet fuel chart http://www.bloomberg.com/apps/quote?ticker=JETINYPR:IND Bloomberg airlines index http://www.bloomberg.com/apps/quote?ticker=BUSAIRL:IND Airline ETF (FAA) http://www.guggenheimfunds.com/etf/fund/faa http://www.guggenheimfunds.com/etf/fund/faa/holdings $XAL component information: http://www.nyse.com/about/listed/mkt_indexes_other_us.shtml http://www.amex.com/othProd/prodInf/OpPiIndComp.jsp?Product_Symbol=XAL
Just posting the "Bloomberg noir" version of the above links: Jet fuel quote http://noir.bloomberg.com/apps/quote?ticker=JETINYPR:IND Jet fuel chart http://noir.bloomberg.com/apps/cbuilder?ticker1=JETINYPR:IND Bloomberg airlines index http://noir.bloomberg.com/apps/quote?ticker=BUSAIRL:IND Bloomberg airlines chart http://noir.bloomberg.com/apps/cbuilder?ticker1=BUSAIRL:IND
Brief comments: Despite $WTIC falling from the high $92 level to below $89.30, the price of jet fuel http://noir.bloomberg.com/apps/cbuilder?ticker1=JETINYPR:IND has remained fairly strong at above $2.70. This is one reason why airlines remained weak for all of last week, despite $WTIC falling by over 3% from its recent highs. Another reason is the poor earnings reports from the likes of DAL and EZJ, and the bad reaction to the reports from AMR and LUV.
Today the airlines had a strong day, outperforming the S&P 500. However over the last 3-months and 6 months, the sector has significantly underperformed the S&P 500. Today's performance was driven by an upward correction from short-term oversold levels, driven by this morning's stronger than expected reports from LCC and UAL. An update on the airline stocks I am following, in an approximate order of weakest to strongest (over a multi-month / multi-quarter timeframe): Easyjet (EZJ.L): bad update 20 January; stock down over 14% http://www.bloomberg.com/news/2011-...retax-loss-may-double-on-snow-fuel-costs.html DAL (bad earnings report on 18 January), stock down a lot on that day AMR ("sell the news" reaction to earnings report on 19 January. Still making losses while other airlines make small profits.) LUV ("sell the news" reaction to earnings report on 20 January). RJET (stock offering at $7.80 suggests that management thought stock was overvalued at that price) JBLU Earnings report scheduled for 27 January. LCC (no fuel hedges; will suffer even more if oil goes over $100) UAL (moved higher on earnings report 26 January) Ryanair (RYA.L or RYAAY): down in sympathy with EZJ, but has since strengthened. Earnings report scheduled for 31 January. SKYW Stronger stocks: ALK, ALGT, HA ********************************* Some other non-US airlines: GOL CEA ZNH TAM LFL VBA.AX QAN.AX IAG.L (merger of British Airways and Iberia)
I'd short Lufthansa, they're not competitive when it comes to pricing and Emirates is eating into their market share with ease. Just look at how much it has rallied recently (although gave up some gains this week). Comparative performance: Air Berlin, Air France-KLM, American, Delta, Lufthansa NOTE: ET can't accept links apparently - it's supposed to be "NYSE: DAL" (without the space) and not any kind of smiley. Fix it please.
LCC has no fuel hedges? This sound interesting.. Do you have a link showing this? Maybe a good options put? Wall street journal just did an article about their stock doubling this year. http://online.wsj.com/article/BT-CO-20110126-707494.html#articleTabs_article
Despite their fundamental analysis,I think DAL is a good stock to watch according to the technical analysis, Commodity Channel Index (CCI) is bullish, MACD was about to crossover , slow stochastic was crossover and Price & Exponential Moving Average formed Crossover signal
This article http://www.businessinsider.com/us-a...for-two-years-says-price-is-going-down-2010-9 is a bit old, but it confirms that LCC does not hedge. I'm sure that if you looked in the SEC filings you would find formal confirmation of this.