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Airlines break-out of holding pattern

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Airline stocks as represented by the Airline Index (XAL.X) have broken out of a recent "holding pattern" and now look like their setting their radar at the highs found in July.

Airline Index Chart - last eleven months.

Attendees of the Option Investor Workshop (October 29th and 30th workshops) might remember some comments that were made regarding the Transportation Index (TRAN) and the Airline Index (XAL.X). We posed some scenarios why these indexes might have been prime for an upward move. Lower energy prices might have been a catalyst for the airline stocks as it represents their second- biggest expenditure (labor is their biggest cost). Another scenario posed was a strong economy. It's still unclear as to why these stock continue to power higher, but the technicals tell us that there's been a bull in the group since October 27th. Hopefully some of the bulls were in the OI workshop!

NYMEX Crude Oil Futures (February contract) - last eleven months.

Maybe the February Crude Oil futures contract (CL01G) will give traders an idea of what has been the catalyst for airline stocks. Sometimes "economic theory" and even "fundamentals" can be put to the "technical" test. Notice where this contract was trading in October and November compared to today's level. If crude oil shoots up to $35/bbl where do you think the XAL.X will go? If crude oil goes to $15/bbl, which way do you think the XAL.X will go? Develop a plan and trade it.

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