NEW YORK (TheStreet) – Delta Airlines
(DAL – Get Report) soared to an all-time high on Jan. 23 and has since lost altitude to its 200-day simple moving average beginning on April 6. This weakness leaves Delta’s weekly chart negative indicating additional downside risk unless the market reacts positively to earnings.
Delta plans to report quarterly earnings before the opening bell on Wednesday and analysts expect the airline to earn 44 cents a share, lowered from 50 cents a week ago.
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Delta Airlines was one of three major carriers that were downgraded by Deutsche Bank earlier this month on reduced international travel. The strong U.S. dollar is also a potential earnings drag.
On the positive side, some analysts expect Delta will continue to benefit from weak crude oil prices and establishing additional routes. Before we take a look at the daily and weekly charts for Delta and the key technical levels, let’s review the basics of technical analysis. Investors not familiar with technical analysis should begin with the notion that a price chart for a stock shows a road map of past price performance, which provides guidance for predicting future share price direction. Here’s how to read a daily chart. There are two moving averages to follow; the 50-day simple moving average is in blue while the 200-day simple moving average is in green. Here’s how to read a weekly chart. This chart shows weekly price bars going back to the beginning of 2007 and thus includes the Crash of 2008, then the current bull market for stocks that began in March 2009. The red line tracks the ups and downs of the key weekly moving average. The green line is the 200-week simple moving average. The red line that oscillates along the bottom of the chart is the momentum reading on a scale of 00.00 to 100.00. A reading below 20.00 is oversold and a reading above 80.00 is overbought. A technically positive weekly chart occurs when a stock ends a week above its key weekly moving average with the momentum reading rising above 20.00. A technically negative weekly chart occurs when a stock ends a week below its key weekly moving average with the momentum reading declining below 80.00. Here’s the daily chart for Delta. Courtesy of MetaStock Xenith Delta had a close of $43.07 on Monday down 12% year to date with the stock just above its 200-day simple moving average of $42.14 and below its 50-day simple moving average of $45.15. The stock has been above its 200-day SMA for the last 24 months until dipping below it between Sept. 30 and Oct. 20. This buying opportunity led to the all-time intraday high of $51.06 set on Jan. 23. Since then, Delta has lost altitude, trading as low as $41.02 on April 6. Here’s the weekly chart for Delta. Courtesy of MetaStock Xenith The weekly chart for Delta is negative with the stock below its key weekly moving average of $44.37 with a momentum reading of 21.89 down 25.69 last week. The stock has been above its 200-week simple moving average since the week of Dec. 14, 2012 when the momentum run-up began. This moving average known as the long-term “reversion to the mean” is now $22.39. Investors looking to buy Delta should place a good till canceled limit order to purchase the stock if it drops to $40.73, which is a key level on technical charts until the end of June. Investors looking to reduce holdings should place a good till canceled limit order to sell the stock if it rises to $54.25, which is a key level on technical charts until the end of June. A key level of $43.59 appears as a magnet on technical charts until the end of 2015. Must Read: 5 Stocks Warren Buffett Is Selling