Airline Stocks Sell Off After EgyptAir Flight Disappears

Airlines JetBlue Airways Corporation (NASDAQ:JBLU) and American Airlines Group Inc (NASDAQ:AAL) are among travel stocks slumping following the disappearance of an EgyptAir flight

by Kirra Fedyszyn

Published on May 19, 2016 at 3:32 PM
Updated on Jun 24, 2020 at 10:16 AM

Travel stocks are selling off today, following news that an EgyptAir flight en route from Paris to Cairo disappeared early this morning. The latest reports indicate that some wreckage from the plane has been located near Karpathos Island, but the cause of the crash is still unknown, and terrorism has not been ruled out. Among airline stocks slumping on the news today are JetBlue Airways Corporation (NASDAQ:JBLU) and American Airlines Group Inc (NASDAQ:AAL). However, while JBLU options traders are betting on more downside, some AAL speculators may be kicking rocks.

JBLU is down 2.5% to $17.84 today -- on pace for its lowest close in more than a year -- bringing is year-to-date loss to 21.3%. The shares have been slumping since early December, with both their 10- and 20-week moving averages rejecting recent moves higher. What's more, the stock is on pace to finish May below its 20-month moving average for the first time since 2012. Still, analysts are largely optimistic, with eight out of 11 holding a "buy" or better recommendation. And short interest has been falling, down more than 16% during the two most recent reporting periods, to represent less than 6% of JBLU's available float.

But in the options pits, traders have been unusually bearish of late. Specifically, JetBlue Airways Corporation has racked up a 10-day put/call volume ratio of 1.94 on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). This indicates long puts have nearly doubled calls during this period. And even more significantly, this ratio ranks higher than 94% of all readings taken in the past year. And today it looks like JBLU is seeing more of the same, with puts changing hands at twice their average intraday pace, including possible buy-to-open action on the stock's June 17 put -- today's most active contract. JBLU hasn't traded south of $17 since the August 2015 sell-off.

AAL has dropped 2% to $31.97, continuing a slide that began in late April, when the company's first -quarter revenue fell short of estimates. The shares are down more than 33% year-over-year and recently broke out below the $34-35 level, which has served as support for much of the past two years. In fact, AAL hit an annual low of $30.99 just Monday. But the stock could be in for even more pain, should analysts begin downwardly revising their outlooks. At the moment, 77% rate American Airlines Group Inc a "buy" or better, without a "sell" on the books.

Meanwhile, options traders have reached a bullish extreme, as the equity's 10-day ISE/CBOE/PHLX call/put volume ratio is now docked at 8.97 -- in the top percentile of its 12-month range. But not all of this call buying necessarily points to optimism. Short interest on AAL has been soaring in recent weeks -- up nearly 65% during the last two reporting periods -- suggesting that some call buyers may in fact be short sellers hedging against potential upside risk.

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