United Airlines Holdings (NASDAQ 🙂 reported first quarter 2021 earnings on Monday, and they weren't pretty. The release revealed both a worse-than-expected loss of $ 1.36 billion and lower-than-expected earnings per share of – $ 7.5.
But perhaps that was not what prompted investors to redeem the shares on Tuesday, with a loss of up to 8.5%.
Forward-looking investors are more concerned about what awaits the passenger carrier than what has already happened. The company's guidelines indicated that the airline does not expect business conditions to change in the immediate future.
According to CEO Scott Kirby's comments during the earnings call, UAL does not expect most of the travel to recover until 2022. He pointed out that companies generally set their travel budgets at the beginning of the year, and by the beginning of 2021, most have not allocated significant funding to corporate travel.
Investors reacted strongly to the weak guidance and simply threw the stock away.
Stocks showed weakness before the report. That was evident both when the price moved above the March 18 peak on April 7, and when the momentum indicator showed a negative divergence, which declined as the price increased.
When stocks move before the fundamentals are known, it is often an indication that & # 39; Informed Money & # 39; – a close circle of people who were somehow connected to the company's situation – innuendo could have picked up on the fundamental emanating from the decision-makers within that circle.
When the well-known basics were published Monday, in the form of income and guidance, the wider public responded, pushing the price even lower, below the neckline of a V&G top.
Currently, momentum has fallen to its lowest level since the beginning of the rising channel, suggesting that the price will not find support at the bottom.
Note, the H&S is in a bullish channel, which means the price can find support at the bottom, which can boost the stock. Therefore, until the channel breaks, we expect the price to resume its current course, meaning higher in the medium term (until proven otherwise, with the channel interruption) and lower, towards the channel bottom, in the short term.
If you look at the map, you can see that it is difficult to navigate. So here are some things to watch out for:
Trading Strategies
Conservative traders should wait for the price to find support at the bottom of the channel before joining the uptrend
Moderate traders would go short if the price performs a return movement confirming neckline resistance.
Aggressive traders could go short at will before entering the market on a rebound, provided they understand and accept the higher risk associated with the higher rewards when going for the rest of the market. Money management is key. Here's a simple example:
Trade Sample
Admission: $ 50
Stop Loss: $ 51
Risk: $ 1
Target: $ 46
Reward: $ 4
Risk: Reward Ratio: 1: 4
Author's Note: This is an example only. There are other ways to weigh the outcome probabilities. For example, waiting for a corrective rally, as described for moderate traders, that would limit the likelihood of a whip saw, but at the price that increases the likelihood of missing the trade. We don't recommend having a target under the channel, which can support the price; you want to operate on the side of the statistics, not against them.
There are many ways to approach a trade. You need to adapt a plan to your timing, budget and temperament. Until you learn how to do this, you can follow our guidelines, but with the goal of learning. If you think you are going bankrupt under general trading plans, you are going out of business. Oh, and you will never become a trader.
