Aces High

Above are charts of LUV, AMR and UAUA. As can be seen, these stocks have been in a steep downtrend. They have been reduced from their lofty perches by an order of magnitude, for AMR and UAUA.

We note some bullish indicators on these:-

1. LUV has been the strongest and has not sold off with the DOW.
2. AMR has a bullish wedge formation. We believe AMR will crack out of this wedge soon.
3. UAUA and AMR have bullish MACD divergence all over their chart.

This year, we have seen the bankruptcy of over 20 airline companies. As Jim Rogers, recently uttered in his interview - "How much more bullish news can there be?". Furthermore, Oil is at sky high and has seen the steepest rate of increase in the past year. We believe the airline industry will consolidate (and has started doing so) i.e. fewer airlines and accordingly

1. Weaker airlines bought out by bigger ones or go bankrupt
2. More importantly, fewer players mean greater pricing power.

We believe, the airline industry will do better over the years. In the shorter term, we expect a correction in oil soon. Airlines will see a huge bounce in their stocks on any oil correction - possibly more than DTO (the double inverse of oil itself). We don't like to bet in downtrending stocks, this is a play trade for us. We made some quick profits on UAUA today. We do believe there is some ways to go on the upside in these stocks.