Airline Stocks Are Rising Despite Headwinds - How to Trade Them

American Airlines Group Inc.  (AAL) - Get Report , Southwest Airlines Co.  (LUV) - Get Report and JetBlue Airways Corp.  (JBLU) - Get Report report earnings on Thursday, Jan. 24. These airlines are ascending with the market despite higher fuel costs, the 32-day-and-counting partial government shutdown and winter storm after winter storm causing delays and cancellations across the country.

American closed Friday at $33.97, up 5.8% so far in 2019 and up 17.9% since its Jan. 2 low of $28.81. The stock is in bear market territory, 40.9% below its March 13, 2018 high of $57.44. The airline has a P/E ratio of 7.62 and offers a dividend yield of just 1.18% according to Macrotrends. Analysts expect this airline to earn $1.05 a share when they report before the open Thursday.

Southwest closed Friday at $51.57, up 11% so far in 2019 and up 16.5% since its Dec. 26 low of $44.28. The stock is deep in correction territory, 19.4% below its Sept. 21, 2018 high of $64.02. The company has a P/E ratio of 13.36 and offers a dividend yield of just 1.24%. Analysts expect this airline to earn $1.06 a share when they report before the open on Thursday.

JetBlue closed Friday at $17.60, up 9.6% so far in 2019 and up 15.9% since its Dec. 24 low of $15.19. The stock is in bear market territory, 22.8% below its March 16, 2018 high of $22.80. The company has a P/E ratio of 12.57 and does not offer a dividend. Some equity money managers cannot own a stock that does not payout a dividend. Analysts expect this airline to earn 42 cents a share when they report before the open on Thursday.

Daily Chart for American Airlines

Courtesy of MetaStock Xenith

American Airlines has been below a "death cross" since May 8, 2018 when the 50-day simple moving average fell below the 200-day simple moving average to indicate that lower prices would follow. This signal followed the stock to its Jan. 3 low of $28.81. The three horizontal lines are my weekly value level of $30.44 with a monthly pivot at $33.14 and quarterly risky level at $39.45.

Weekly Chart for American Airlines

Courtesy of MetaStock Xenith

The weekly chart for American Airlines ended last week positive with the stock above its five-week modified moving average at $33.46. The stock is well below its 200-week simple moving average or "reversion to the mean" at $42.78. The 12x3x3 weekly slow stochastic reading ended last week at 26.97, up from 24.34 on Jan. 11.

Trading Strategy: Buy American on weakness to my monthly pivot at $33.14 and down to my weekly value level at $30.44 and reduce holdings on strength to my quarterly risky level at $39.45.

Daily Chart for Southwest Airlines

Courtesy of MetaStock Xenith

Southwest Airlines has been below a "death cross" since Nov. 30 when the 50-day simple moving average fell below the 200-day simple moving average to indicate that lower prices would follow. This signal followed the stock from its 200-day at $55.75 on Dec. 4 to its Dec. 26 low of $44.28. The five horizontal lines begin with my weekly value level of $46.61. My monthly, semiannual, annual and quarterly risky levels are $53.96, $54.71, $60.64 and $61.47, respectively.

Weekly Chart for Southwest Airlines

Courtesy of MetaStock Xenith

The weekly chart for Southwest Airlines ended last week positive with the stock above its five-week modified moving average at $50.18. The stock is above its 200-week simple moving average or "reversion to the mean" at $49.24. The 12x3x3 weekly slow stochastic reading ended last week at 26.01 up from 19.80 on Jan. 18, moving above the oversold threshold of 20.00.

Trading Strategy: Buy Southwest on weakness to its 200-week SMA at $49.24 and to this week's value level at $46.61 and reduce holdings on strength to my monthly and semiannual quarterly risky levels at $53.96 and $54.71, respectively.

Daily Chart for JetBlue

Courtesy of MetaStock Xenith

JetBlue has been below a "death cross" since April 5, 2018 when the 50-day simple moving average fell below the 200-day simple moving average to indicate that lower prices would follow. This signal followed the stock to its Dec. 24 low of $15.19. The stock tested its 200-day SMA at $20.01 on Sept. 20, 2018 and at $19.10 on Nov. 29 as opportunities to reduce holdings. The two horizontal lines are my monthly and quarterly value levels at $16.97 and $16.49, respectively.

Weekly Chart for JetBlue

Courtesy of MetaStock Xenith

The weekly chart for JetBlue ended last week positive with the stock above its five-week modified moving average at $17.18. The stock is well below its 200-week simple moving average or "reversion to the mean" at $20.31. The 12x3x3 weekly slow stochastic reading ended last week at 33.90 up from 29.40 on Jan. 11.

Trading Strategy: Buy JetBlue on weakness to my monthly and quarterly value levels at $16.96 and $16.49 and reduce holdings on strength to the 200-day and 200-week simple moving averages at $18.42 and 20.31, respectively.

Disclosure: The author has no positions in any stocks mentioned and no plans to initiate any positions within the next 72 hours.