How Much Worse Will the Coronavirus Hurt Airline Stocks?

NYSE: SPY | SPDR S&P 500 ETF Trust News, Ratings, and Charts

SPY – The US. Global Jets ETF (JETS) is down 32% in recent weeks, worse than the broader SPDR S&P 500 (SPY) 12% correction during the same period. Continue reading to find out how detrimental the coronavirus could get for airline stocks.

The airline stocks had been the first to decline as the Covid19 virus started spreading beyond China and they have now been the hardest hit.  The “US. Global Jets ETF (JETS)”  is down some 32% in the past three weeks, which is nearly three times worse than the broader “SPDR S&P 500 (SPY)” 12% correction over the same time period. 

While there is no sign travel will return back to normal anytime soon, in fact, it will probably get worse in the coming weeks, it seems investors might be trying to find a glimmer of bluer skies for the sector. 

In trading, the saying  “it’s always darkest before the dawn” translates to “reversals often occur when traders and investors are most afraid they won’t.

In real-time, of course, it’s extremely difficult to know when those moments are occurring, and it’s even more of a challenge to put on a trade. But when prices reach levels that allow you to clearly define risk and potential reward, it can be easier to make an objective decision.

Airline stocks look like they are trying to have that moment today as JETS and several of the major carriers have seen a big reversal and were actually up on the day even as SPY was still down over 2% at midday. 

In technical analyst terminology, such price action creates a “hammer” or “green candle” which often identifies important turning points. 

airline stocks prices

While some smaller and foreign airline stocks which don’t have strong balance sheets and are seeing a near standstill in travel might struggle and face the possibility of bankruptcy the major U.S. based carriers will be able to make it through the storm. 

Assuming travel begins to normalize by the summer a few of the airlines are starting to look attractive from both fundamental valuation measures and technical levels. 

“Southwest (LUV)” which is mostly domestic travel within the U.S. just touched the low near $45 it hit during the December 2018 sell-off.  

southwest airlines

Experienced traders know markets like to inflict as much pain as possible before they reverse—head fakes at key technical levels are one way to do that. But traders who are prepared to weather a certain amount of adverse price action, while committing to limiting losses at a predetermined level, can sometimes find themselves in good positions.  

The use of long-dated options will also help define and limit losses. 

 

 

 

 

 


SPY shares were trading at $294.91 per share on Friday afternoon, down $7.55 (-2.50%). Year-to-date, SPY has declined -8.37%, versus a % rise in the benchmark S&P 500 index during the same period.


About the Author: Option Sensei


Steve has more than 30 years of investment experience with an expertise in options trading. He’s written for TheStreet.com, Minyanville and currently for Option Sensei. Learn more about Steve’s background, along with links to his most recent articles. More...


More Resources for the Stocks in this Article

TickerPOWR RatingIndustry RankRank in Industry
SPYGet RatingGet RatingGet Rating

Most Popular Stories on StockNews.com


Is This REALLY a Bull Market?

The S&P 500 (SPY) keeps making record highs...but does that mean that market conditions are truly bullish? 44 year investment veteran shines a light on how hollow recent gains are as they are only accruing to a handful of stocks with most investors searching high and low for stock market gains. Read on for more...

Unveiling Adobe (ADBE) Q2 Earnings: What Lies Ahead for Investors?

Software giant Adobe Inc. (ADBE) has released its second-quarter earnings, revealing double-digit growth in both revenue and profits. Yet, concerns arise around the complexities of navigating growth in the face of advancing AI technologies. Let’s analyze ADBE’s recent performance and assess key fundamentals to uncover what lies ahead for investors…

3 AI Stocks to Invest in for the Next Technological Revolution

The AI market is experiencing a significant growth trajectory, driven by widespread application across various industries. Hence, it could be wise to invest in top AI stocks, Alphabet (GOOGL), Meta Platforms (META), and Alibaba Group Holding (BABA) for the next technological revolution. Read more...

Analyzing Broadcom’s (AVGO) Q2 Earnings: Worth Investing?

Driven by a surge in demand for its AI products, Broadcom (AVGO) reported robust earnings in its latest quarterly results, exceeding expectations on both top and bottom lines. However, is the stock’s recent announcement of a 10-for-1 stock split worth investing in? Keep reading to find out…

Bullish or Bearish Stock Set Up?

The S&P 500 (SPY) record highs sounds pretty darn bullish on the surface. Yet as we dig below the surface there are some curious signals that point more Risk Off. This is especially true as we come into the next Fed meeting after a round of data that points to inflation still being too high...only further delaying the first rate cut. What does this all mean for stocks from here? Steve Reitmeister offers his latest views on the market outlook along with a preview of his top picks to stay on step ahead of the market. Read on for more...

Read More Stories

More SPDR S&P 500 ETF Trust (SPY) News View All

Event/Date Symbol News Detail Start Price End Price Change POWR Rating
Loading, please wait...
View All SPY News