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Trading American Air as the Shares Rally After a Quarterly Loss

American Airlines stock is rallying a bit after the carrier posted a quarterly loss. Let's turn to the charts for the outlook.

Quarterly reports keep rolling in for the airlines, with both American Airlines  (AAL) - Get American Airlines Group, Inc. Report and Southwest Airlines  (LUV) - Get Southwest Airlines Co. Report reporting on Thursday morning.

Southwest reported its largest quarterly loss ever, while American Airlines lost $2.4 billion after a 73% year-over-year drop in revenue.

Worse, American Air burned about $44 million a day in the quarter. Management expects to cut that figure to $25 million to $30 million a day in the current quarter.

Investors are apparently taking that as good news, with the shares up on the day despite the horrendous headline numbers.

The airlines are a difficult industry. On the one hand, it seems like a safer bet than the cruise space, which has yet to really begin sailing again. But on the other hand, airlines are losing billions of dollars per quarter and burning through cash at a startling rate.

However, when a stock doesn’t go down on bad news, it warrants a closer look.

Trading American Airlines Stock

Daily chart of American Airlines stock.

Daily chart of American Airlines stock.

American Airlines has not traded like the rest of the market. While the shares plunged in early March, they remained volatile before bottoming out in May.

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After a scorching rally in June, the shares petered out, settling into a trading range between $11 support and $14 resistance. Over the past six weeks, though, the trading range has tightened as the stock put together a series of higher lows and lower highs.

While the stock is up on the day after the carrier reported poor results, the shares remain trapped below the 50-day and 100-day moving averages.

What does this mean for traders? While the stock’s refusal to trade lower is impressive, the charts don't offer a whole lot of clarity. That means it’s still stuck in a range without a lot of commitment in either direction.

On the upside, I would like to see American Airlines stock give us a weekly-up rotation over $13.17. That will also put the stock over the 50-day and 100-day moving averages.

Although wedge resistance isn’t far off in this scenario, a move over this area is the minimum we need to see for the shares to retest $14 resistance. 

A breakout over $14 likely puts the 200-day moving average in play, followed by a possible test of the 38.2% retracement up near $16.90.

More conservative traders will likely wait for a close over $14.

On the downside, a break of $11.97 is troubling, as it puts American Airlines stock below this month’s low, as well as wedge support.

A close below that mark could put the September low on the table at $11.22, followed by range support near $11.