Delta Air Line Stock's Recent Rally Could Hit a Ceiling

DAL has already shed more than 10% so far this year

Digital Content Manager
Aug 16, 2022 at 2:02 PM
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The shares of Delta Air Lines, Inc. (NYSE:DAL) were last seen up 0.5% at $35.17. The security recently staged a bounce off its June 30, roughly two-year low of $28.09, and yesterday notched its fourth-consecutive win, but remains down 10.9% so far in 2022. It looks like the equity's rally may soon come to an end, though, as one historically bearish signal comes into play.

The trendline in question is Delta Air Line's 100-day moving average, which the shares just came within one standard deviation of after trading well below the level since June. Per data from Schaeffer's Senior Quantitative Analyst Rocky White, five similar signal have been observed in the last three years. After 60% of these occurrences, the stock was lower, averaging a one-month drop of 4.7%. A similar move from its current perch would put DAL back at the $33 mark.

 

DAL 100 Day

The brokerage bunch is overwhelmingly optimistic towards Delta Air Lines stock, leaving plenty of room for downgrades and/or price-target cuts. Of the 14 in coverage, 12 carry a "strong buy" rating, while the 12-month consensus target price of $48.03 is a 37.1% premium to current levels. 

A shift in the options pits could create additional headwinds for DAL. At the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the stock sports a 50-day call/put volume ratio of 4.47, which is higher than 99% of readings from the past 12 months. In other words, long calls are being picked up at a quicker-than-usual clip. 

Options look like a solid route to weigh in on the security's next moves, as premiums are affordably priced at the moment. This is per the DAL's Schaeffer's Volatility Index (SVI) of 39%, which stands in the low 15th percentile of annual readings.

 

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