Shares of Spirit Airlines (SAVE - Get Report) have pulled back off a key retracement level to their 40 week (200-day moving average), and now look prepared to bounce higher. The move has an initial price objective that targets a potential 10% gain.
The weekly chart shows the stock dropping by over 60% from its 2014 high to its 2015 low. In early 2016 it managed to return to the 38% Fibonacci retracement level of the sharp previous decline and, after a summer pullback, rallied through that resistance and returned to the 50% retracement level. This year the stock has pulled back to its rising 40-week moving average and technical indications are it is prepared to make another higher high. The stochastic oscillator has made a bullish crossover and is moving out an oversold zone, and this particular positive indication has signaled the start of the past two rallies. On those two previous occasions the accumulation/distribution was moving lower and below its signal average, and this time it is moving higher and above a rising average, which is an additional bullish sign.
On the daily chart, the pullback this year found support at the 50% Fibonacci retracement level of the fourth-quarter rally last year, which was being reinforced by the 200-day moving average. The stock has now moved back above that 38% retracement level, the downtrend line which defined the recent three-month decline, and has closed over its 50-day moving average. Price momentum indications are also bullish on this timeframe and Chaikin money flow is above its signal and center lines.
Spirit is a buy at its current level using a position size that allows for an initial stop under the daily 38% retracement level. The next level of significant resistance is the 50% weekly retracement level in the $59.00 area, which would be a 10% move higher.