Alaska Air Group has been basing near a major support zone since last month's mixed earnings report. The stock has spent the entire month of May in a narrow range while a few of the other regional carriers, like Jetblue and Southwest, are trading at their yearly highs. A catch-up move for ALK may be coming as the stock begins to lift off what may prove to be a major bottom.
ALK reached its 2017 peak as March began, after surging nearly 40% after the election. This powerful rally leg carried shares to all-time highs, but as March got underway, it was clear upside momentum had been completely wiped out. The stock traced out a steady pullback through the remainder of March and well into April before shares took a damaging earnings-inspired hit on April 27. ALK appeared headed for a fresh down leg in the aftermath, but a key support zone near $84.00 contained the loses. Since reaching this area in late April, the stock has been building a very solid base with the help of an upward sloping 200-day moving average. A rebound move from this zone could carry shares sharply higher.
In the near-term, investors should consider this B+ rated stock a low-risk buy near current levels. ALK has a very solid support zone in place from the $86.00 area down to last week's low near $82.00. On the upside, a close above $89.00 would clearly break the upper trendline of a 12-week bear channel that has been in place since the March peak. On the downside, a close back below $82.00 would likely lead to further basing.
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