While the midweek session may go down as the debut of the Trump administration’s so-called Liberation Day, it was also notable for aviation buffs because of JetBlue Airways (JBLU). Specifically, JBLU stock just flashed the death cross, a technical phenomenon where a shorter-running moving average slips beneath a longer-running one. Typically, it’s when the 50-day moving average intersects below the 200 DMA.
Outside of any context, the death cross represents a simple mathematical exercise. But when you factor in the human component, what it reflects is sustained negativity that has taken control of the target asset’s trajectory. When the death cross flashes, it may signal the beginning of a serious downturn or even an outright bear market.
Unlike other technical gauges such as the relative strength indicator (RSI), the death cross rarely flashes. From that perspective, the intersection may offer analytical value. At the same time, the nature of the underlying lesson is what arouses debate.
In particular, should the death cross be interpreted at face value? If so, investors exposed to the security in question may want to reduce risk. On the other hand, there are many who view the death cross as a contrarian signal. Under this framework, speculators should consider loading up the boat.
What’s frustrating to readers of financial publications who come across death cross stories is this: the interpretation comes down to a guess. But thanks to the power of technology and back-testing, we can empirically determine how to trade JBLU stock.
That’s right — I’m going to walk you through a clear strategy with defined benchmarks. Let’s begin.
Understanding the Statistical Backdrop of JetBlue’s Death Cross
On Wednesday, JBLU stock ended the session at $5.04, representing a 5.44% lift from the prior session. Despite the robust performance, the equity has been struggling badly since the start of this year, losing about 36%. As such, JBLU flashed the death cross.
Going back a decade, the discount airliner printed the aforementioned pattern nine times (not including the most recent example). These events are listed as follows:
- On Feb. 3, 2016, JBLU flashed the death cross at a closing price of $20.84.
- On Sept. 15, 2017, when JBLU closed at $19.38.
- On April 5, 2018, when JBLU closed at $20.64.
- On Oct. 7, 2019, when JBLU closed at $16.61.
- On March 16, 2020, when JBLU closed at $10.61.
- On Aug. 6, 2021, when JBLU closed at $15.25.
- On April 11, 2023, when JBLU closed at $7.22.
- On Sept. 1, 2023, when JBLU closed at $5.93.
- On Aug. 15, 2024, when JBLU closed at $4.68.
Barchart Premier members can actually download the daily historical price data of JBLU stock and calculate an ideal entry point based on how the equity statistically responds to the death cross flashing. But on average, I can tell you that one month after the negative intersection, JBLU has only popped four times, or a contrarian success ratio of 44.44%. That’s not great.
Similar or even worse ratios can be observed for other time frames, including six months out and one year removed from the death cross flashing. In other words, the technical pattern can be interpreted at face value; that is, death is bad.
However, three months out, the success ratio is actually firmly in favor of the bulls at 66.67%. That’s the nuance that you’re not getting with other death cross analyses: it’s not just the signal itself but the timing that’s important.
How to Trade JBLU Stock
Based on statistical tendencies, speculators interested in targeting the latest death cross in JBLU stock should be prepared to hold the security for about a quarter. If you’re looking for an options-based approach, you’ll need to consider the options chain expiring July 18.
The simplest approach involves buying a call option straight up. One possible idea is to acquire the $5 call for the aforementioned expiration date. Assuming the positive outcome, the three-month return following the flashing of the death cross averages nearly 19.5%. That would lead to a projected target of $6.02, making the $5 call (plus the premium) quite lucrative.
Another approach is to buy a bull call spread, specifically the 5.00/5.50 for the same expiration date. This transaction involves buying the $5 call (at a time-of-writing ask of $77) and simultaneously selling the $5.50 call (at a bid of $52). The proceeds from the short call partially offset the debit paid for the long call, resulting in a net cash outlay of $25.
In terms of the maximum reward, it comes out to the difference between the strike prices (multiplied by 100 shares) minus the net debit paid or $25. That’s a 100% payout, adding intrigue to this death cross setup.
