AAL Stock Could Take a Tumble, Says Signal

The stock is ripe for analyst downgrades, too

Deputy Editor
Jul 5, 2019 at 11:56 AM
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The shares of American Airlines Group Inc (NASDAQ:AAL) have been trying for a rebound on the charts since the stock hit a two year bottom of $27.02 in late May. The stock has run into resistance several times near the $33.50 region, and is back on its way down, trading 1% lower at $32.38 today. While the equity has still managed to keep its head atop its year-to-date breakeven, a technical signal just sounded that could push AAL back below this level. 

Specifically, AAL just came within one standard deviation of its 160-day moving average after a lengthy stretch below the trendline. This signal has flashed seven times in the past few years, per data from Schaeffer's Senior Quantitative Analyst Rocky White. The stock was higher one month later only 17% of the time, and averaged a loss of 10.70%. A move of similar magnitude would put AAL back down below its aforementioned breakeven, at $28.92. 

AAL Chart July 5

Should the security continue south, it could be vulnerable to some downgrades. Currently, 11 analyst call American Airlines a "buy" or better, while only four have dubbed the stock a "sell" or worse. What's more, the consensus 12-month target price of $40.56 represents an area the equity hasn't touched since October. 

That being said, now could be a good time to speculate with options. AAL's Schaeffer's Volatility Index (SVI) of 28% is in the third percentile of its annual range. This means near-term options traders are pricing in relatively low volatility expectations. Plus, the security's Schaeffer's Volatility Scorecard (SVS) sits in the 85th percentile of its annual range, indicating that American Airlines stock has tended to exceed option traders' volatility options during the past year. 

 

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