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Stocks head higher with Airlines showing gains

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Stocks are trading to the upside this morning with the broader market averages all showing gains on the heels of this morning's better than expected retail sales numbers. While the retail sales numbers still showed weakness, the downside wasn't nearly as bad as many had feared and most likely has some bears covering some positions.

The S&P Retail Index (RLX.X) is up just fractionally at $903.94 after having just edged up to a new 52-week high on January 7th at $939.

Airline stocks are getting a boost today as depicted by the Airline Index (XAL.X) and a 5.2% gain here to $92.78.

Airline Index Chart - $2 box

The Airline Index (XAL.X) leads today's sector gainers. I've marked the chart up to help traders and investors get a feel for things. A bullish channel looks to have formed and the XAL.X has had a tendency to trade the upper band of the channel. The upper end of a bullish channel is identified by the point and figure chartist by identifying a long column of O's and subsequent reversal of that column of O by and X (demand) column. From there, we simply place a 45-degree trend. The lower end of the channel is defined in a similar manner, but here we simply look for the last column of O before the first "buy signal" (X column exceeding a previous column of X). The first buy signal off the bottom gave us a bullish vertical count of $144, which was invalidated by the recent "bear trap" sell signal. The current bullish count is $132.

On November 9th, I profiled a "strangle" in shares of Continental Airlines in the June $20 Calls (CALFD) and the June 15 puts (CALRC) to try and take advantage of longer-term action. At the time, we had no idea which way things would shake out. So far, the bulls look to be winning and so should subscribers that took the strategy. I called it the "forget me trade" whereby an investor that couldn't watch the market on an hourly or daily basis could still trade an option strategy and perhaps make money longer-term.


You can click the above link to take you back to that commentary in our archive section. November on the above chart is the "red B."

Jeff Bailey
Senior Market Technician
Option Investor

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