Delta Air Lines, Inc. (DAL) shares moved lower on Thursday after worse-than-expected second quarter financial results disappointed investors. The stock responded by breaking down from its long-term trend dating back to early May 2017, which could signal the beginning of a bearish trend over the coming quarters. Traders may want to watch for a further move lower over the coming weeks given the bearish nature of technical indicators.
During the second quarter, revenue rose 3.3% to $10.79 billion – missing consensus estimates by $30 million – and earnings per share of $1.64 missed consensus estimates by one cent. Management expects operating margins of 18% to 20% during the third quarter, with fuel costs averaging $1.55 to $1.60 per gallon. Capacity is also projected to increase about 2%, with unit revenue jumping 2.4% to 4.5% for the quarter. (See also: Delta Air Lines Lags Q2 Earnings Despite PRASM Growth.)
From a technical standpoint, the stock broke down from trendline support at around $55.00 after a short-term double top at around $55.75. The relative strength index (RSI) remains modestly overbought at 60.01, while the moving average convergence divergence (MACD) could see a bearish crossover in the near term. These technical indicators suggest that traders should maintain a bearish bias on the stock in the short term.
Traders should watch for a breakdown to the pivot point at $52.52 or the 50-day moving average at $51.33, although it is possible that the stock will consolidate between the trendline and pivot point levels before any more substantial move lower. If Thursday’s move turns out to be a false breakout, the stock could rebound above trendline resistance to R1 resistance at $55.75 and ultimately re-test its recent highs. (For more, see: American Airlines’ Upbeat Forecast Lifts Airline Stocks.)
Charts courtesy of StockCharts.com. The author holds no position in the stock(s) mentioned except through passively managed index funds.