American Airlines Stock Might Get a Crash Landing, Says Signal

The shares of American Airlines Group Inc (NASDAQ:AAL) have taken a beating since hitting their peak of $59.08 in January last year. Since then, the shares have been in a channel of lower highs and lows. And while AAL stock has gained roughly 27% since bottoming out at two-year lows of $28.81 on Jan. 3, its next leg lower could be just around the corner, if recent history is any indicator. 

The airline concern recently came within one standard deviation of its 160-day moving average, after a lengthy dip below the trendline. This technical signal has flashed four times in the past three years, according to data from Schaeffer's Senior Quantitative Analyst Rocky White. After these past four signals, AAL was positive only once and averaged a 13.35% loss one month out. From the equity's current perch at $36.51, a move of the same magnitude would send AAL back to the $31-$32 neighborhood.

Should history repeat itself, an unwinding of analyst optimism could leave the travel stock open to even more headwinds. Currently, an overwhelming 10 out of 15 analyst following AAL consider it a "strong buy," and there isn't a "sell" to be seen. Plus, the consensus 12-month target price of $45.78 represents a roughly 25% premium to current levels. 

Considering this, now might be the time to speculate on the equity's decline with options. AAL's Schaeffer's Volatility Index (SVI) of 32% stands just higher than 12% of all other reading from the past year. This means that near-term options are pricing in relatively low volatility expectations, and that AAL premiums are attractively priced at the moment.