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Delta Air Lines Is Approaching Key Support Level on Earnings Selloff

Delta Air Lines is declining despite beating earnings and revenue estimates. There's one key support measure to keep in mind.

Delta Air Lines  (DAL) - Get Report was probing its session lows on Wednesday, down about 2.5% after reporting earnings.

Many investors were hoping that the quarterly report would act as a positive catalyst and jolt the stock out of its recent rut.

The stock was rallying in premarket trading.

That was after the company beat earnings and revenue estimates and called for profitability in the second half of 2021. But the gains didn’t stick.

In fact, other airlines like Southwest Airlines  (LUV) - Get Report and American Airlines  (AAL) - Get Report have been struggling too. It’s the classic “buy the rumor, sell the news” reaction. But it's not just to earnings - that’s also been the reaction to the reopening trade.

Despite a big increase in traveling and even new orders for companies like Boeing  (BA) - Get Report, the airline stocks (Boeing included) have had trouble garnering upside momentum.

Can Delta find its footing?

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Trading Delta Air Lines

Daily chart of Delta Air Lines stock.

Daily chart of Delta Air Lines stock.

Delta Air Lines stock topped out in the first quarter and has been in a downward channel since.

Lately, the stock has been spending a lot more time near the bottom of that channel than the top. In any regard, I’m wondering if this name can garner a bounce.

While it’s not all that attractive to see a stock sell off on relatively good news, we’re coming into a potential key support mark as sentiment may be nearing a trough.

As Delta breaks below the 200-day moving average and last week’s low, it could be triggering a lot of stop-loss orders. Investors are bailing as the stock is unable to find upside momentum and is breaking key downside levels.

However, the 50-week moving average is sneakily resting just below current prices around $40. Near that mark, the stock also finds the 50% retracement and channel support.

If support fails though, it’s possible that Delta Air Lines stock breaks down to $37 (and potentially lower).

On the upside, I’m looking for a bounce back to the 200-day moving average, followed by $43. Above that and the 50-day moving average could be in play.

First though, let’s see how Delta does on a test of the 50-week moving average and $40 level. If it holds, it may be worth a shot. If not, look out.