Since its record high in early April, when Delta Air Lines (NYSE:) shares peaked above $51, the stock has lost nearly a quarter of its value. The Atlanta-based airline's inventory fell along with demand for its flights as the fourth wave of COVID began to escalate.
Nevertheless, the airline's results showed a strong increase in mid-July, leading some to expect rising demand regardless of the fourth wave. We are skeptical.
There is no clear link between a strong second quarter, which occurred before the virus flared up again, and the reduced ticket sales the airline is now seeing. In addition, there is no indication of when the fourth wave will end. All this is not optimistic for Delta stocks.
DAL Daily
DAL has been moving sideways since mid-July, which may have sparked hopes of a bottom among some. However, when the 50 DMA plunged below the 200 DMA, it created a Death Cross, highlighting the recent price weakness. The bearish pattern also suggests a sustained downward path.
If the price drops below $27, it will form a huge H&S top, which has been in place since November. to provide a decisive downside breakout, complete the H&S summit, using both time and price filters to avoid a bear trap. They then waited for the price to bounce back in a return move to retest the neckline, which will push the price back down, before considering the risk of a short position.
Moderate traders would also wait for the pattern to complete, with downward penetration, while also using filters to avoid being flogged. Like their conservative colleagues, they too can wait for a corrective rally, for better access, if not further confirmation.
Aggressive traders can short a slot below $37, with the understanding that the price could be wild at the time. They must act with a plan that meets that risk, with a proportionately fair reward. Here's an example:
Trade sample
Admission: $37
Stop Loss: $38
Risk: $1
Target: $32
Reward: $5
Risk: Reward Ratio: 1:5
