History Says to Buy These 2 Airline Stocks Right Now – Schaeffers Research (blog)

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Stocks have kicked off the second half of 2017 with a bang, as oil prices head toward an eighth straight win. And while biotechs have historically been one of the best-performing sectors this month, several airline names are on the list of best stocks to own in the July-to-December stretch, including Alaska Air Group, Inc. (NYSE:ALK) and Delta Air Lines, Inc. (NYSE:DAL) — both of which are trading near key technical levels.

ALK One of the Best Stocks to Own in 2H

ALK shares are trading up 0.4% at $90.11, bringing their year-over-year return to 53.5%. More recently, the stock took a bounce off its 200-day moving average in May, and could now establish a foothold in the $88-$90 region — home to its year-to-date breakeven mark and a 23.6% Fibonacci retracement of its mid-2016 to early 2017 rally.

alk daily chart july 3

Historical tailwinds could help keep Alaska Air stock’s momentum going through year’s end, too. According to data from Schaeffer’s Senior Quantitative Analyst Rocky White, ALK has averaged a second-half gain of 37% in the last 10 years, and has been positive 90% of the time. 

A continued round of short covering could also help boost the outperforming airline stock. Although short interest on Alaska Air shares is down 20% since the start of the year, there are still 7.01 million ALK shares sold short — or nearly six sessions’ worth of pent-up buying demand, at the stock’s average pace of trading.

DAL Options are Cheap Right Now

Delta Air Lines has put in an impressive performance on the charts, surging nearly 50% over the last 52 weeks. Earlier, the shares hit a record high of $54.71, and were last seen up 1.2% at $54.40. And while any near-term pullbacks could be contained near $54 — home to DAL’s 10% year-to-date breakeven mark — below this is possible support at $52, which coincides with the stock’s former highs and a 23.6% retracement of its current surge from April.

dal stock daily chart july 3

Similar to its sector peer, DAL shares have historically been strong in the final six months of the year. In the past decade, Delta Air Lines stock has averaged a gain of 30.9%, with an 80% win rate.

Now appears to be an affordable time to bet on DAL’s near-term trajectory with options, too. The stock’s Schaeffer’s Volatility Index (SVI) of 25% ranks in the 10th annual percentile, meaning low volatility expectations are being priced into short-term Delta Air Lines options — a potential boon to premium buyers.

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