Tuesday, July 13, 2010

DAL Watch

Delta Air Lines Inc. (DAL), the second large air carrier, moved to bull phase on the macd and Person's Proprietary Signal (pps) as the company glides toward an earning announcement next Monday before the markets open.

DAL $12.15

Another major signaller, the parabolic sar, went bullish yesterday, and the fast stochastic today moved into overbought territory, a measure of the strength of the current rise.

DAL has been moving sideways since January, between roughly $11 and $15. Earnings announcements for this company have typically prompted sharp moves -- the airline industry, as we all know, is hyper-competitive and therefore volatile.

The question, as always on a volatility play, is which way will the surprise be. The stock is trading in the lower half of the range, which would argue for an upside bias, but today's rise pulled back after approaching the 20-day simple moving average, arguing for downside bias.

There are more reversal levels to the downside, which argues for greater upside potential. But if the earnings truly are a surprise, then reversal levels will mean little as traders scramble to get on the right side of the news.

All of that directional angst goes away for traders who adopt an agnostic posture, such as an options straddle (Example: Buy an equal number of 12-strike September calls and puts.) With that strategy, it doesn't matter which direction it moves, only that it move.

Volume so far this week is running higher than at the end of last week, suggesting some interest in the stock. However, the volume peaks so far have been well below the levels seen in June.

Reversal Levels
  • $14.48, +19.2%
  • $12.35, +1.7% (20-day ma)
  • $12.15 <== You are here.
  • $11.43, -5.9%
  • $10.i3, -10.0%
  • $10.71, -11.9%

The Great Reflation: How Investors Can Profit From the New World of Money
OK. The credit bubble burst. Housing, burst. Shockwaves reverberated. Markets collapsed. What lies ahead as we reemerge from the wreckage.

Tim Bovee, Private Trader tracks the trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment. No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decision decisions for his or her own account, and take responsibility for the consequences.
  • psar - Parabolic Stop and Reverse
  • adx - Average Directional Index
  • pps - Person's Proprietary Signal
  • ma20 - 20-day moving average
  • macd - Moving Average Convergence-Divergence
  • sto - Fast Stochastic
About the glance: The colors indicate the state of each signal.
  • trend: Determined by the 5-day moving average, green for up, red for down, yellow for sideways
  • adx: orange for above 30-up, blue for 20-down, purple for in the middle. Red is most prone to whipsaws
  • psar, pps, macd: green for bull mode, red for bear
  • sto: green for overbought, red for oversold, yellow for the neutral zone.

No comments:

Post a Comment