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Holding Pattern

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Most stocks are in a holding pattern before the FOMC meeting, but airline stocks are continuing their nosedive. As the economic slowdown continues to cut into lucrative corporate travel profits, airlines have been forced to follow Priceline and Jet Blue's business no frills business plan. The major airlines have reduced their selection of juices, stopped handing out individual waters in first class, and halted second in-flight movies just to name a few cost cutting measures.

Airline Index Daily Chart

Today's 1.55% drop has the Airline Index (XAL.X) below support at 132. This April low has been tested twice before, but has cracked today. Whether it's the yearlong downtrend or a MACD that has rolled over, it looks airlines want to test the October 1999 low at 125.80

Southwest Airlines Daily Chart

Even Southwest's (LUV) cheap fares and bare bones approach can't stop its stock's decline. Southwest completed a double top July, breaking below the 50-dma in the process. Yesterday the stock tried to mount a quick reversal, but has failed at the base of the double top today, and is once again heading lower. Support lies 55 cents away at $17.50, and then at $16.

Continental Daily Chart

Yesterday Continental Airlines (CAL) completed a double top, and is following through today with a $1.09 drop. The MACD is approaching oversold levels, but still might have time to fall to $38.70.

United Daily Chart

United Airlines (UAL) has been holding up better than its counterparts, and even managed to crack a 1.5-year downtrend. UAL tried to complete a cup with handle formation, but the handle has dragged out for 2 months. At least the stock is consolidating, and not plummeting. A drop below $33.40 could change that.

Jeffrey Canavan
Assistant Analyst

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