Monday, July 19, 2010

DAL Watch

I discussed Delta Air Lines Inc. (DAL) as an earnings suprise play in a post about a week ago. Earnings came today and, surprise surprise, there was a large price move, but one that was quickly retraced.

When I first wrote about DAL it was walking on the bull side according to all the signalers. Things began to turn bearish late last week, and today's earnings announcement, with a cautionary outlook, caused the price to decline 11.1% intra-day on about three times Friday's volume. The bulk of the decline happened in pre-open trading, and a retracement up to 1.2% above the opening price began a bit after 10:15 a.m. Eastern.

So, how does a trader best exit a surprise play? I think there are two schools of thought.

One says, along with the 19th century financier Nathan Rothschild, "sell when you hear the cannons". The earnings announcement is the cannons, the that school of traders would have sold at the open this morning.

A second school looks at declines that happen a day or week after earnings. There's no rule that says the initial report must be factored into the market within a single trading day. So the second school looks to the signals and will sell DAL upon the first sign of bullishness.

Such a sign could be bull phase on the pps or parabolic sar. But also a change in the macd trend or a move of the fast stochastic back into bull territory. You take your choice.

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.

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