Major investors such as Warren Buffett have invested billions of dollars into airline stocks over the past several years. Based on the charts that we'll discuss in detail below, it looks as though now could be a great time for the average investor to follow suit.
U.S. Global Jets ETF (JETS)
The rise in popularity of niche funds such as the U.S. Global Jets ETF (JETS) has provided both professional and retail investors with an interesting way of gaining targeted exposure to a particular market segment. More specifically, as the name suggests, the JETS ETF gives investors access to global airline operators and manufacturers with a particular focus on large-cap U.S. airlines.
As you can see below, the fund has been trading within a defined range since the start of 2018, and traders are patiently waiting for the price to close above the nearby trendline to spark a flood of buy-stop orders. The recent close above the long-term resistance of the 200-day moving average is the first major hurdle, and it will be very interesting to see if the trendline will prevent a move higher like it did in the past or whether it will be able to break out this time and start the next leg of the primary uptrend.
United Continental Holdings, Inc. (UAL)
United Continental Holdings, Inc. (UAL) is among the top holdings of the JETS ETF with a weighting of 12.10%. As you can see from the chart pattern below, United Continental shares are currently trading within a well-established channel pattern that has dominated the price action over the past six months.
Range-bound traders will look to sell near the upper trendline in anticipation of another pullback toward the lower support level. On the other hand, breakout traders will want to keep this stock on their watch lists because a break beyond $90 could be used as a catalyst of a sharp move higher. Based on the pattern, target prices will most likely be set near $102.50, which is equal to the entry point plus the height of the pattern.
Delta Air Lines, Inc. (DAL)
Another top holding of the JETS ETF that followers of technical analysis will want to keep an eye on is Delta Air Lines, Inc. (DAL). As you can see below, the strong performance so far in 2019 has pushed the price above its 200-day moving average.
The bullish momentum has also resulted in a bullish crossover between the 50-day and 200-day moving averages (shown by blue circle) in what is known as the golden crossover. This common buy signal is often used by active traders to mark the beginning of a long-term uptrend. From a risk management perspective, stop-loss orders will most likely be placed below $53.18 in case of a shift in fundamentals.
The Bottom Line
Airline stocks have been sought after by professional investors such as Warren Buffett for several years now. For shorter-term active traders, based on the patterns discussed above, most airline stocks currently seem to be trading within a short-term period of consolidation and could be gearing up for a major move higher. With moves across key levels of resistance and the market bias to the upside, major breakouts across the airline sector could be the story to watch over the second half of 2019.
At the time of writing, Casey Murphy did not own a position in any of the assets mentioned.