How to Trade Delta After Its Earnings Tumble

Delta Air Lines is under pressure after reporting first-quarter earnings results. Let's look at the chart to highlight must-hold support.
Author:
Publish date:

Delta Air Lines  (DAL) - Get Report didn't set a great tone after the company reported earnings before the stock market opened Thursday.

Shares fell about 3.5% after the airline reported its first-quarter results, where it lost $2.9 billion and missed analysts’ bottom-line estimates. 

On the plus side, management talked about a return to profitability, with the situation much more optimistic vs. where we were a year ago.

Flight traffic has recovered significantly in recent months as the U.S. continues its aggressive vaccine rollout and as the public continues to push for a return to normalcy.

Still, Delta’s recent quarterly report reminds investors of the dark reality of COVID-19, with steep losses and lots of operational headaches.

That’s not a Delta-specific issue either. United Airlines  (UAL) - Get Report, American Airlines  (AAL) - Get Report and others have struggled too.

Trading Delta

Daily chart of Delta stock.

Daily chart of Delta stock.

Should Delta finish lower on the day it will be its seventh consecutive daily loss.

So far - including earlier this week - the 10-week and 50-day moving averages have been support. However, these measures are being put to the test on Thursday.

If they hold and provide a bounce, bulls will have faith in this $46.50 area as a level of support, as well as these two key moving averages.

However, if this zone fails as support, a dip is quite possible.

Specifically, a break below current moving average support could send Delta down to the $44 area. There Delta stock will find the prior breakout spot, as well as the 21-week moving average.

Should a decline of that nature occur, I would expect this area to act as a bounce zone, at least upon its first test. Notice how the 21-week moving average has been decent support for several quarters now.

On the upside, there are a few levels to keep an eye on as well.

First, it would be ideal if current support held at the 50-day moving average. However, on a push higher, we need to see Delta stock reclaim its 10-day and 21-day moving averages.

If it can do that, $50 is in play, followed by the double top area near $52. Above the 78.6% retracement and Delta stock can really start to fly higher, putting that big gap-fill mark in play up at $56.87.

For now, watch the 50-day and 10-week moving averages.