A pullback for airline stocks has positioned Delta Air Lines for a possible rebound. That gives investors a couple of clear entries to Delta Air stock, Monday's IBD Stock Of The Day.
Airlines turned in a powerful advance, rising 47% from mid-March to late July. Fuel costs, potential union strikes and concerns over China's economy all challenged investor confidence data showing the industry was recovering to pre-pandemic travel levels.
The 20-stock group pulled back almost unanimously. Delta and United Airlines dropped 11%. American Airlines Group fell almost 18%. Domestic players also took their licks.
The holdout was tiny SkyWest, rising 8% in July as the others fell, adding a third straight monthly advance. On Monday, SkyWest shares traded up 161% since the start of the year.
Delta Air Executes Picture-Perfect Pullback
Delta Air sat on a year-to-date gain of nearly 36% Monday. That slightly lagged United's 40% tally, but easily topped American's 24% advance.
But looking at its charts, Delta Air stock never touched its 50-day line, finding support at its 10-week line. Shares never came close to a prior bottoming-base buy point of 40.30. Volume was below average.
American's pullback cut well below its 10-week moving average. United also undercut that key level of technical support, though not by much. Both undercut bottoming-base buy points.
United's share price had eased to its 10-week level. On a daily chart, MarketSmith shows UAL stock moving back above its 50-day line.
That suggests institutions are holding on, or even stepping in to buy at that 50-day/10-week level. This is why it is considered a level of technical support. And it suggests the stock may well be primed for a jump when more buyers step in.
Charting Delta Stock's Buy Points
So if Delta shares overtake Monday's intraday high of 45.42, they're fair game for investors. That buy point would get a little reinforcement if the stock powers past its 21-day exponential moving average, which currently hangs at about the 45.77 level.
While buy zones for most bases extend 5% above their buy point, rebounds get a 10% entry margin. That would make Delta in season through 49.97. Those a little more bold could maybe chase shares through 50.34 — 10% above the 21-day level.
Delta Air earnings growth averaged 296% over the past four quarters, slowing to a still impressive 86% gain in Q2. Revenue growth averaged 36%, slowing in the second quarter to a 13% increase.
It gets IBD's No. 2 ranking among the stocks in the Transportation-Airline industry group. Panamanian airline Copa Holdings holds the top ranking. It reports second-quarter results Aug. 10.
