Chart of the Day – $DAL for Talking Numbers

by Enis May 24, 2013 11:57 am • Commentary

Here’s a preview of what I’ll be discussing on Talking Numbers today between 3:20 and 3:30 pm EST on CNBC:

The airlines have been one of the best performing sectors in the market this year.  It’s one of the few sectors that I’ve liked from both a fundamental and technical perspective for the past 3 months (see here), though I’ve had essentially no position in that time, so poor job by me.

In any case, what to make of DAL today?  On a fundamental basis, it’s still a relative bargain in this market, at 7x projected 2013 earnings.  Airlines also have the potential tailwind of lower oil prices this year, which I expect, since oil inventories are near all-time highs and emerging market growth is weaker than it has been in years.

On a technical basis, DAL looks strong as well.  First chart is a longer-term 5 year chart showing the important breakout above $15 resistance earlier this year.  That level was multiyear resistance, and I expect it to act as support going forward:

5 year weekly chart of DAL, Courtesy of Bloomberg
5 year weekly chart of DAL, Courtesy of Bloomberg

The second chart is a 1 year chart showing the importance of the 50 day moving average.  No need to make this more complicated – the 50 day ma is trending support, now around the $16.75-$17 area.  This is a strong uptrend that also experienced a long-term breakout.  I would get interested in a swing trade on the long side if it retraced to that area.