Bullish on the Airlines

Over the past few months there have been very few bright spots in the market. The broader market averages look like they are trying to bottom, but it will likely many months ( I'm guessing the second half of this year) before we will see a tradable rally in them. The Airline Industry is one of the few Industry groups however that looks like it wants to rally first. The first thing to look at is it's 150 day moving average. It flattened out over the last couple of months of last year and has started to trend up. Also, the XAL Index has also held up well against the S&P. It''s Relative Strength line is plotted out on the chart below. Higher highs and higher lows over the last few months have also been encouraging.

If we believe the Airline Industry is going to rally before the rest of the market, then the next step is to identify the stocks in this industry that will perform the best. Below is a list of 19 publicly traded airlines, sorted by their 3 month performance.

Out of this list, I found a few individual airlines that look the best.

First is SkyWest (SKYW). The first thing to note about this stock is it's increasing relative strength. It has been increasing since last July and held up well through the downturn in the last half of last year. It looks like made a higher low on the 27th, holding above it's 150 day moving average (which has started to trend up bullishly). Note a strong resistance level around $20, which dates back to 2003. A break above this level would be very bullish.


Airtran (AAI), Continental Airlines (CAL), and Alaska Air (ALK) are all the same story. Improving relative strength, a flattening out of their moving averages, as well as higher highs and lows since last summer.

Airtran (AAI)

Continental Airlines (CAL)



Alaska Air (ALK)

Over the next few months we may find the other Airlines will start to stand out above their peers. I encourage to look into all the Airlines I posted and find the ones you think are the best. The action we are seeing in this Industry group however should give us confidence that some of these names should rally well before the broader market does.