Will Southwest Airlines Take Flight?

Ed Ponsi

Southwest Airlines (LUV) is expected to report earnings on Thursday, July 23rd before the market opens. Analysts are looking for the discount carrier to lose $2.50 per share, on revenue of $540 million. 

Like most airlines, Southwest has had a rough first half. Since the start of the year, shares of the Dallas-based carrier have lost about 37% of their value. However, the stock has recently regained some of its losses. 

Will Southwest Airlines continue to climb after its earnings report? Let's go to the charts to find out. 

On the left side of the chart, we see the stock plunging as the Covid-19 pandemic takes hold. Southwest bottomed in mid-May, then quickly shot from $23 to $42 per share. Since peaking on June 5th, Southwest has given back approximately 50% of that gain. 

LUV

More recently, Southwest has formed a tight double bottom pattern, highlighted in blue. This pattern projects Southwest to the $40 area in the short term. Turnover for the stock has been noticeably light; in fact, on every trading day from June 17th through July 17th, Southwest traded with below average volume. 

Financially, Southwest is in better condition than many of its peers. However, the company is preparing its staff for layoffs. CEO Gary Kelly is urging Southwest employees to consider early retirement packages, as well as long-term leave programs.

Any layoffs that might occur are likely to happen after October 1st, the expiration date of the CARES act. Employees at Southwest and other airlines are hopeful that the CARES act will be extended. 

Ed Ponsi is the managing director of Barchetta Capital Management, and is the author of three books for publisher Wiley Finance. A dynamic public speaker, Ed has made appearances around the world, in such diverse locations as Singapore, Dubai, London, and New York. For more information about Ed and his work, click here.