Few investors have the power to move market sectors like Warren Buffett. The famed Berkshire Hathaway (NYSE:BRK.A, NYSE:BRK.B) CEO relinquished his entire holdings of several airline stocks recently. The next thing you know, those stocks started declining. And we’re looking at some of their big stock charts today.
Buffett’s a soft-spoken and folksy investing legend. Therefore, his explanation regarding why he sold off his airline-industry stocks was polite and tempered. “We were not disappointed at all in the businesses that were being run and the management, but we did come to a different opinion on it,” said Buffett.
Did the Oracle of Omaha make the right move? The stock charts might provide us with some insight here. Thus, Tuesday’s big stock charts will examine three airline sector names that fell after Warren Buffett ever-so-politely dumped his shares.
American Airlines (AAL)
It’s more than fair to say that American Airlines (NASDAD:AAL) isn’t a market darling at the moment. Besides the Buffett dumpage, Evercore ISI Research analyst Duane Pfennigwerth assigned AAL stock a price target of $1. Is it really headed in that direction?
- With a swift and decisive move, AAL stock broke below the crucial $10 support line. Since the price is now below it, we should consider $10 to be resistance until it breaks back above the line.
- The daily trading volume was heavy on Monday. This suggests that there is true conviction behind the price move, and unfortunately for the bulls it was a day of powerful selling pressure.
- The 50- and 200-day moving averages are both pointing downwards, which is a bearish sign. The 20-day moving average is horizontal, but that could easily change soon. Moreover, the price of AAL stock is below all three of those moving averages.
Delta Air Lines (DAL)
Admittedly, this is a tough time to have faith in the future of Delta Air Lines (NYSE:DAL). The company recently admitted that it doesn’t expect the air travel market to recover for a while — two to three years, in fact. Will investors have to wait that long for DAL stock to recover?
- The $22 level is the battle zone for long and short traders. Monday’s sell-off left is unclear as to whether the bulls or the bears are winning that battle. This is crucial as $22 could prove to be either support or resistance.
- Either way, DAL stock was pushed decisively below all three of the major moving averages on the chart. These are hurdles that need to be cleared before the bulls can regain control of the situation.
- A small descending triangle is starting to form on the chart. This is commonly considered a continuation pattern if the price breaks below the horizontal bottom line. That happened on Monday, so watch for potentially lower prices in the near future.
United Airlines (UAL)
“A low-probability event happened and it particularly hurt … the airline business,” explained Buffett as he sold off his entire stake in United Airlines (NASDAQ:UAL) stock. And speaking of probabilities, what are the chances of a rebound in UAL shares at this point?
- The main feature of the UAL stock chart is the small symmetrical triangle that’s forming. This is typically considered bullish if the stock price breaks above the upper resistance line. Unfortunately for the bulls, the stock broke below the lower support line on Monday.
- There’s also a large bearish pennant on the chart. The flagpole started in February and ends with the narrowing price action that began in March. This formation could easily lead to a major breakdown in the price action.
- The bulls really need for UAL stock to start climbing above the three major moving averages on the chart. Otherwise, it could be all downhill from here.
As of this writing, David Moadel did not hold a position in any of the aforementioned securities.