Until now, 2020 has not been particularly friendly to travel-related shares, especially airline shares. As concluded last year, a flu-like illness originated from the central city of Wuhan in China. In early January it was identified as something new and was named coronavirus, later Covid-19.
The virus spread rapidly to other parts of China, and also via travelers to Thailand and Japan. Mid-January, the first deaths were reported by Covid-19. On January 23, Chinese supervisors suspended travel to and from the Wuhan area, although the Sino New Year's holiday, which began on January 25, was fast approaching.
In the following days, as reports of additional cases skyrocketed, travel restrictions were extended to a wider area of ??China; then flights to and from China were canceled and the locals were instructed to stay home from work and cancel holiday trips.
With enlightened employees, factories reduce production, leading to fewer shipments and another source of revenue for airlines dries up.
Shares in the transport sector started to shift. Even wider travel-related ETFs began to falter.
The SPDR S&P Transportation Fund (NYSE :), which is still 3.39% higher this year – and owned by 43.7% ground freight and logistics; 25.82% shares of airlines and 16.01% air freight and courier services – remain within a triangle so far. However, a supply zone pushed the price down last month, although this month is still green.
But shares of airlines in both the US and Asia clearly show the tension.
United Airlines (NASDAQ 🙂 broke below the upside last month. Initial support is around 70, demand zone around 60. The RSI shows bearish divergence (red arrow) and a broken trend line (blue).
Australia & # 39; s Qanta & # 39; s (ASX 🙂 fell sharply last month and this month's falling star candle appears to be heading towards the upward line (blue) and demand zone (light blue rectangle) around 5.00 -5.50
Singapore Airlines (SI 🙂 is always low, with no clear bottom at the moment.
Although China has eased some travel restrictions on the mainland because the number of newly reported cases seems to have slowed down, the fear of the spread of the pandemic worldwide has increased. The cancellation of air and sea voyages around the world – the Far East already, and now with a growing outbreak in Italy, possibly to Europe, and possibly eventually to the US if the situation is not contained – is likely to put pressure on the sector continue.
What can give a boost to distressed transport shares?
If the price falls, the overhead costs of airlines would fall accordingly
Airlines have already started raising air freight shipping prices, a step that could improve their results
The arrival of warmer weather may reduce the chance that the virus will spread further
Nevertheless, the best solution would, of course, be a return to some sort of normal, both in terms of travel and health. Of course, when that could happen, we recommend everyone.
