Delta Airlines … The Short Set-Up

Hanging In ‘Mid-Air’

It’s a good thing we’re not listening to the financial press as the market’s ‘Call The Fed’s Bluff’; we would’ve missed the set-up.

Let’s bookmark this post (like the last one), come back in July or so, and see how the poker-hand with The Fed played out.

Three guesses on who’s going to win and the first two, don’t count. 🙂

With Delta, it’s not the Fed they have to worry about. A series of events were set in motion (i.e., pilot ‘shortage’) that may not get fixed for years to come.

Ditto, for the other airlines.

Moving on, let’s take a look at what the price action of Delta (DAL), is telling us.

For brevity, we’ll go straight to a marked-up (and time compressed) weekly chart of DAL.

Delta Airlines DAL, Weekly

DAL spent nearly a year building a ‘terminating wedge’ before breaking down during February of 2020.

Hmmm, February of 2020, what was happening back then?

That breakdown, coupled with the terminating wedge, and it’s almost as if someone knew something; time enough to position massively short or buy put options.

Subsequent retrace off the 2020 lows, were at lower and lower Fibonacci levels … with the current retrace at 50%.

The Options Trade

Dr. Alexander Elder describes (Come Into My Trading Room) one way to trade options that few attempt.

That is, instead of buying long dated options and then waiting for the slow burn down of capital, the lesser-known method is exactly the opposite.

In his book, he describes buying short-dated OEX (S&P 100) Put options for 3/8ths … back in the day when the market traded in fractions.

Two days later, he sells the options for 17, a 4,433% gain.

Taking that method and applying it to the daily chart, we have the following.

Delta Airlines DAL, Daily

On Friday, there was a huge gap-lower, open.

Price action spent the rest of the session attempting to close the gap. Volume increased substantially from Thursday’s session (up +46%)

Yet, price action was not even able to touch the lows of that session; Friday’s high of 38.29, vs. Thursday’s low of 38.32.

It’s a nuance that may have meaning or not.

The Short Trade

As shown on the chart, a position was opened with a Put; strike at 35, and priced (at entry) at 0.09 (not advice, not a recommendation).

Following Elder’s method, the price and short expiration, says there’s no hope for this trade.

Stay Tuned

Charts by StockCharts

Note:  Posts on this site are for education purposes only.  They provide one firm’s insight on the markets.  Not investment advice.  See additional disclaimer here.

The Danger Point®, trade mark: No. 6,505,279

United Airlines … Signals Sell

3:13 p.m., EST

There’s no such thing as corporate ‘leadership’.

At this point, especially after witnessing the ‘lock-step’ positioning of major corporations over the past year, one thing is obvious:

They’re all operating in concert.

The coordinated message is that everything’s getting back on track. No need to worry.

See how ‘normal’ things are? Big companies are even ‘planning’ for the future. Stay calm and take no (preparatory) action.

Indian Summer:

The reality is, just as this link suggests, we’re in an Indian Summer. That is, we’re between two extremes.

The past year can be viewed as the summer heat. Then, we’ve just had a break (advent of fall/winter) with restrictions being lifted … but soon the figurative and literal winter will come.

Think that’s a bit much? Well, let’s just take a look at one item.

The video in the link above, mentions the need for ‘body bags’; that we’ll run out … sounds insane.

Well, here they are … all ready to go.

Which brings us to the markets.

Chart Analysis, UAL:

The long term, Quarterly chart shows the extent of the technical damage.

The 80% drop could be the beginning of a multi year (maybe decades long) decline.

If it was a crash (like lumber futures), it will have the typical crash-like structure.

That is: An initial swift, decisive decline; followed by retracement which then rolls over into a sustained and long term move lower.

Meanwhile, the S&P 500, is hovering at its all-time-highs.

Not only has UAL not made a new all time high (posted way back in December of 2018), the weekly chart shows it’s formed a terminating wedge.

At this point, it’s ‘rolling out’ of that wedge indicating sell or sell short; Not advice, not a recommendation.

Stay Tuned

Note:  Posts on this site are for education purposes only.  They provide one firm’s insight on the markets.  Not investment advice.  See additional disclaimer here.