American Airlines stock (AAL) has been trending sideways and a rectangle pattern has formed in its chart. When this pattern is broken, a breakout or breakdown is expected.
AAL is the world’s largest airline by scheduled revenue passenger miles. The firm’s major hubs are Charlotte, Chicago, Dallas/Fort Worth, Los Angeles, Miami, New York, Philadelphia, Phoenix, and Washington, D.C.
AAL has suffered due to a coronavirus-led drop in demand. This has resulted in a few bad quarters, but as the vaccine rollout continues into the summer, the airline should see a rebound in passenger revenue. Plus, AAL has the youngest fleet among major airlines, which should lower fuel expense and maintenance going forward.
The drop in demand led to cash burn, which has led to a concerning current ratio of 0.7. This means that its current assets are lower than its current liabilities. The company’s profit margin is also negative.
Sales are down year over year, but should rebound in the quarter ending in June. AAL has a very low valuation with a trailing P/E of 2.81 and has shown recent bullish performance, leading to a Momentum Grade of B in our POWR Ratings system.
Take a look at the 1-year chart of AAL below with added notations:
AAL has been trending higher for the past five months, but has recently moved into a small, sideways trading range. While in the range, the stock has formed a resistance level at $26 (red), and a level of support at around $24 (green), and a rectangle pattern has emerged.
At some point, the stock will have to either break the resistance or the support. The possible long position is on a move above $26. The ideal short opportunity would be on a break below $24.
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AAL shares were trading at $24.37 per share on Monday morning, down $0.60 (-2.40%). Year-to-date, AAL has gained 54.53%, versus a 4.40% rise in the benchmark S&P 500 index during the same period.
About the Author: Christian Tharp
I am an expert stock market coach having helped over 4000 beginner and advanced traders & investors from around the world take control of their financial futures. I also write stock market related articles for the Adam Mesh Trading Group and Yolo Publishing. More...
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| Ticker | POWR Rating | Industry Rank | Rank in Industry |
| AAL | Get Rating | Get Rating | Get Rating |
