Trading American and United as Airlines Hit More Turbulence

The airlines are experiencing more volatility, this time on comments from Boeing's CEO. Here's a look at the stocks of airlines United and American.
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Airline stocks are under pressure on Tuesday, potentially tied to the comments from Boeing  (BA) - Get Report CEO David Calhoun.

Speaking on NBC’s "Today" Show, Calhoun said it’s possible that a major U.S. airline carrier will go out of business in 2020. Further, he said it’s unlikely that airline traffic will even get back to 25% of its normal rate by September.

Given that the summer travel season is often one of the best quarters for the airlines, that’s a disturbing outlook. It also creates little confusion as to why shares of United Airlines  (UAL) - Get Report, Southwest Airlines  (LUV) - Get Report, Delta Air Lines  (DAL) - Get Report and American Airlines  (AAL) - Get Report are under pressure on the day.

The stocks are still reeling from disappointing earnings results and Warren Buffett’s exit from the industry. Let’s take a closer look at the charts.

Trading American Airlines

Daily chart of American Airlines stock.

Daily chart of American Airlines stock.

The $10 mark has been a big level for American Airlines stock. However, the 2020 low is down near $9. Earlier this month, shares broke through $10 before retesting and holding that $9 area.

The problem is, $10 is beginning to act as resistance. When former support is lost and turns to resistance, it’s a bearish development. It doesn’t help that American Airlines is trending lower and is below all of its major moving averages.

At least the setup is simple. Keep an eye on $9. If this level is lost and the stock closes below it, shares can continue to decline.

Above $10 is a win for the bulls — albeit a small one. In that event, it puts the 20-day moving average and downtrend resistance in play, followed by the 50-day moving average.

Trading United Airlines

Daily chart of United Airlines stock.

Daily chart of United Airlines stock.

United Airlines stock has looked a little better than American Airlines, but not by much. Like American, United stock is below downtrend resistance and its key moving averages.

However, unlike American, United hasn’t retested its March low. That’s an encouraging sign for longs.

Right now though, shares are looking weak. What bulls want to avoid is a break of this month’s low at $22.39. If that happens, it puts the $21.50 area in play. Below that and the 2020 low near $18 is possible.

You can see how a prolonged selloff could have a cascading effect for United Airlines stock.

On the upside, shares need to close above the declining 20-day moving average. Above puts the 50-day moving average in play, followed by the 23.6% retracement near $35, which is also where the April highs come into play.