NEW BULLISH Plays

American Airlines Group Inc. - AAL - close $38.53

Stop Loss: 37.25
Target(s): to be determined
Current Gain/Loss: unopened

Entry on May -- at $--.--
Listed on May 17, 2014
Time Frame: 9 to 12 weeks
Average Daily Volume = 10.3 million
New Positions: Yes, see below

Company Description

Why We Like It:
AAL is in the services sector. AAL is the merger between US Airways and American Airlines (AMR). The new company, American Airlines Group, is the largest carrier with nearly 6,7000 flights a day, over 330 destinations, to more than 50 countries, with over 100,000 employees worldwide.

This $17 billion merger was threatened by the U.S. Justice department last year. Regulators tried to block the merger on fears the new company would be too big, hold too much power, and reduce competitiveness and thus pricing for consumers. A U.S. district judge just recently approved a settlement worked out between AAL and the Justice Department where the new company agreed to sell certain assets to competitors. Getting the legal hurdle for its merger out of the way it's one more worry that investors can forget.

The airlines would also like to forget about winter. The 2014 winter season was brutal for the airline industry. In January and February the Bureau of Transportation Statistics said 6.05% of all domestic flights were cancelled. That number dropped to 4.6% of all flights cancelled in March. Put them all together and you have the worst winter cancellation rate in 20 years. Yet this news has failed to stop the rally in airline stocks. Granted AAL did consolidate sideways for a few weeks but now it is only a couple of points away from new eight year highs.

AAL just recently released data on April. Their revenue passenger miles for April were up 4.7 percent to 18.1 billion in 2014 versus April 2013. Odds are this number is going to improve since summers tend to be more bullish for the airline business.

Wall Street seems keen on shares of AAL. Goldman Sachs recently put a $46 price target on the stock. In the latest 13F filings it was revealed that Paulson & Co had raised their stake in AAL from 8.5 million shares to 12.2 million. Meanwhile David Tepper is the hot fund manager everyone loves and his Appaloosa Management has AAL as its second largest holding. In the last quarter Appaloosa increased their AAL stake by 22.5%.

On a short-term basis shares of AAL are sitting just below resistance at $40.00. I am suggesting a trigger to launch bullish positions at $40.25. We'll start with a stop loss at $37.25, just under this past week's low. I'm not setting an exit target yet but probably somewhere in the $45-50 zone.

Trigger @ $40.25

Suggested Position: buy AAL stock @ (trigger)

- (or for more adventurous traders, try this option) -

Buy the Aug $40 call (AAL140816C40) current ask $2.30

option format: symbol-year-month-day-call-strike

Annotated chart:

Weekly chart:



CONMED Corp. - CNMD - close: 49.61

Stop Loss: 47.40
Target(s): to be determined
Current Gain/Loss: unopened

Entry on May -- at $--.--
Listed on May 17, 2014
Time Frame: 6 to 8 weeks
Average Daily Volume = 236 thousand
New Positions: Yes, see below

Company Description

Why We Like It:
CNMD is in the healthcare sector. The company provides surgical devices and equipment for minimally invasive procedures. CNMD's most recent earnings report was a bit disappointing. They beat the bottom line estimate by two cents but missed the revenue estimate. Management lowered their Q2 revenue guidance but reaffirmed their full year guidance. Shares plunged on the news but it proved to be a one-day drop as traders have been buying the dips.

The question is why are investors buying the dips in CNMD? The stock soared back on April 15th when Reuters reported that CNMD had asked its advisors to find potential bidders to buy the company. This decision from CNMD might be a response to activist investors pushing the company to do more for shareholders. One analysts firm is estimating the company could go for $59 a share of acquired.

The stock is currently trading near all-time highs but it's also sitting just below round-number resistance at the $50.00 mark. We are suggesting a trigger to launch bullish positions at $50.25. We're not setting an exit target yet but we'll start with a stop loss at $47.40.

Trigger @ $50.25

Suggested Position: buy CNMD stock @ $50.25

Annotated chart:

Weekly chart: