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Buffett Dumps the Airlines - How the Charts for Delta and Southwest Look Now

Airline stocks are getting hit hard on Monday but many are avoiding new lows. Let's look at the charts of Delta and Southwest.

Delta Air Lines  (DAL) - Get Delta Air Lines, Inc. Report, Southwest Airlines  (LUV) - Get Southwest Airlines Co. Report and other carriers are under pressure Monday.

The group is getting hammered, with many stocks in the group down 10% or more. While painful earnings and cash-burn concerns from last week continue to linger — a $1 price target for American Airlines  (AAL) - Get American Airlines Group, Inc. Report isn’t helping matters — it’s a different catalyst hurting the group on Monday.

Over the weekend, Berkshire Hathaway undefined undefined held its annual meeting. Rather than a stadium full of spectators though, it was just Warren Buffett.

Buffett explained that his firm has exited all of its positions in the airlines, selling Delta, Southwest, American and United Airlines  (UAL) - Get United Airlines Holdings, Inc. Report.

He said investors should not necessarily think of this as speculation that the group will go lower. However, with airlines taking on billions in federal aid as the coronavirus wreaks havoc on business, he sees limited upside from here.

Do the charts agree?

Trading Delta Stock

Daily chart of Delta stock.

Daily chart of Delta stock.

Many investors consider Delta the top airline stock to watch. In other words, it’s the barometer for its peers. Interestingly enough, Southwest is “only” 54% off its highs vs. Delta, which is 65% off its highs.

However, Southwest is making new lows on the day while Delta has avoided such a fate.

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The $20.50 level continues to act as a solid level of support for Delta stock. A move below this mark puts the 52-week low at $19.10 in play. Should DAL stock break below and fail to reclaim $19.10, even more downside may ensue.

For now though, shares are holding this $20.50 area. If shares can reclaim the $22.50 mark, it puts the declining 10-day moving average in play. Above that and bulls will have made a formidable stand in the face of very negative news. This would be bullish. 

Even more bullish would be reclaiming last week’s highs near $27.50.

Trading Southwest Stock

Daily chart of Southwest stock.

Daily chart of Southwest stock.

As mentioned, Southwest Airlines stock is making new lows on the move.

While it was nice to see shares hold up better than its peers on a percentage basis, Southwest stock has not looked very attractive from a technical perspective.

Shares continued to form a series of lower highs, with downtrend resistance (blue line) and the 10-day moving average squeezing the stock against a static level of support near $29. That’s known as a descending triangle, a bearish technical development favoring a breakdown.

Now below $29, the stock is a no-touch. That is, until it can reclaim the prior low at $28.25 as well as prior support at $29. It will also need to climb back over the 10-day moving average and downtrend resistance.

At this stage, Southwest stock is in no man’s land, while Delta continues to hold the lows. See if this remains the case going forward.