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How to Trade Southwest, Spirit, American Air After Earnings Reports

Southwest, Spirit and American Airlines all reported earnings. Here's how to trade each stock from here.

Now that the airlines are reporting earnings, investors want to know if it’s time to go long.

Delta Air Lines  (DAL) - Get Delta Air Lines Inc. Report kicked things off last week, pulling back after disappointing results. That came in the midst of a 10-day losing streak.

But the sector's shares are trying to move higher. Southwest Airlines  (LUV) - Get Southwest Airlines Company Report, Spirit Airlines  (SAVE) - Get Spirit Airlines Inc. Report and American Airlines  (AAL) - Get American Airlines Group Inc. Report are all fresh off their quarterly reports.

The vaccination efforts in the U.S. have led investors and analysts to be bullish on recovery plays, such as the airlines. Can that momentum continue? Let’s look at the charts.

Trading Southwest Airlines

Daily chart of Southwest stock.

Daily chart of Southwest stock.

Southwest posted a narrower-than-expected loss for the quarter, which is giving shares a boost on the day.

This has been the best-performing airline stock. The shares are already back above the pre-coronavirus 2020 highs. That’s near $59, a key support level from earlier this week.

It helps that the 10-week and 50-day moving averages are in play near this level, too.

On the downside, see that Southwest stock continues to hold up above these marks. Below opens the stock to a larger decline.

On the upside, I want to see a push through $65 and a move up toward recent uptrend/channel resistance.

Trading American Airlines

Weekly chart of American Airlines stock.

Weekly chart of American Airlines stock.

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American Airlines stock is struggling to rally on Thursday, down 2% after reporting a $2.7 billion loss.

If it can find its footing, look for a move back up through the 10-week moving average and the 61.8% retracement.

Above both of these measures and bullish traders may be able to stay long this name. That would have me looking at $25 on the upside.

On the downside, a break of the 50% retracement and 21-week moving average makes American Airlines more vulnerable, potentially putting $17 back in play.

Trading Spirit Airlines

Weekly chart of Spirit Airlines stock.

Weekly chart of Spirit Airlines stock.

Spirit Airlines has been trading pretty well. The shares have been riding a powerful rally, as they find support from the 10-week moving average and uptrend support (blue line).

Now, though, we have some decisions to make.

Those support measures are holding up as Spirit goes through some bullish consolidation. That comes after a long stretch where not much resistance was in the way. 

Now we have the stock contending with its 200-week moving average, a measure it’s currently below. We also have the $40.40 mark, which was the gap-fill from last February.

Spirit barely filled the gap before backing off this measure. Is that considered a “job well done” and it's time to move on from Spirit? We’ll find out in time.

Specifically, I am keeping an eye on this week’s low at $33.71. A close below that does not bode well for bulls, as it puts the stock below too many key support measures.

On a close above the 200-week moving average, look for a push up toward $40.40 and the recent high at $40.77. Above that and the mid-$40s is possible.