Southwest Airlines Stock Flashing Bear Signal Before Earnings

The airliner will report earnings before tomorrow's open

Deputy Editor
Jan 25, 2023 at 2:35 PM
facebook X logo linkedin


Ahead of its fourth-quarter earnings report, shares of Southwest Airlines Co (NYSE:LUV) are fractionally higher, last seen up 0.3% to trade at $36.77. However, LUV is trading near a historically bearish trendline that could add pressure in the next month.

Specifically, the equity is within one standard deviation of its 200-day moving average. For the purpose of this study, Schaeffer's Senior Quantitative Analyst Rocky White defines that as the equity trading below the moving average for 80% of the time over the past two months, and closing south of the trendline in eight of the last 10 sessions.

According to White's data, five similar signals have occurred during the past three years. Southwest Airlines stock was lower one month later after every one of these signals, averaging a one-month loss of 10.1%. A similar move from the security's current perch of $36.65 would put LUV just above $116. 

LUV Chart January 252023

Southwest Airlines is slated to step into the earnings confession before the open tomorrow, Jan. 26, and analysts are anticipating fourth-quarter losses of 9 cents per share. The stock has a history of negative post-earnings responses, finishing five of eight next-day sessions lower, including a 6.4% dip in July. LUV averaged a move of 2.6% over the last two years, but this time around the options pits are pricing in a bigger swing of 5.7%, regardless of direction.

Speaking of the options pits, traders have favored bearish bets lately. This is per Southwest Airlines stock's 50-day put/call volume ratio of 1.65 that stands higher than all other annual readings, per data at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). What's more, LUV boasts a Schaeffer's put/call open interest ratio (SOIR) of 1.13 that stands above 100% of readings from the past year.

Those looking to join these traders could do so for a bargain right now. This is per the security's Schaeffer's Volatility Index (SVI) of 35% that stands in the relatively low 14% annual percentile. This implies options traders are pricing in low volatility expectations at the moment.

 

Target Effortless Triple-Digit Gains Every Sunday Evening For Life!

This is your chance to triple your profit potential on Sunday evenings, without spending all your free time watching the market.

On Sundays, as a Weekend Plus subscriber, you’ll get up to 6 trades every Sunday, each targeting gains of 200% or more.

Start targeting gains like the ones our subscribers have seen recently, including:

213.3% GAIN on AutoNation calls
100.0% GAIN on Monster Beverage calls
100.4% GAIN on Walgreens Boots Alliance puts
100.4% GAIN on ON Semiconductor calls
257.7% GAIN on Dell calls

101.0% GAIN on Apollo Global Management calls
103.6% GAIN on JP Morgan  Chase calls
105.3% GAIN on DraftKings calls
101.3% GAIN on Airbnb calls
203.0% GAIN on Shopify calls
102.0% GAIN on Cboe Global Markets calls
100.9% GAIN on Boeing calls
102.1% GAIN on Microsoft puts
102.3% GAIN on First Solar calls
101.5% GAIN on PulteGroup calls
101.0% GAIN on Apple calls
209.4% GAIN on NXP Semiconductors calls
100.8% GAIN on Uber Technologies calls
100.4% GAIN on Academy Sports and Outdoors puts
102.2% GAIN on Trade Desk calls
100.8% GAIN on DoorDash calls
100.0% GAIN on Camping World Holdings puts
100.0% GAIN on Cboe Global Markets calls
100.2% GAIN on C3.ai calls
238.5% GAIN on Oracle calls

 
 
 


 
 

Rainmaker Ads CGI