Flight Delays Hit United Continental Holdings Inc (UAL) Ahead of Earnings

United Continental Holdings Inc (UAL) is just the latest airline stock to make headlines this week

by Alex Eppstein

Published on Oct 14, 2016 at 11:44 AM

It's been an eventful week for airline stocks, and that trend is continuing today with United Continental Holdings Inc (NYSE:UAL). Specifically, ahead of Monday night's earnings report, the airline ran into a computer glitch overnight that delayed at least 37 flights -- but has since been resolved.

The stock is largely shrugging off the fundamental setback, last seen 0.5% higher at $53.96. Longer term, UAL shares have been soaring since bottoming over the summer south of $38, up 44% relative to their late-June annual low of $37.41. What's more, the stock recently touched its 40-day moving average, which has proven a bullish signal in the past. Looking back three years, UAL has touched this trendline seven times, and in the ensuing five sessions, has averaged a gain of 3.4%.

ual daily october 14

Of course, Monday's earnings report could go a long way in determining where UAL goes from here. Historically, these quarterly numbers have produced mixed returns -- including a single-session drop of 10% following the airline's late-April report. This time around, the options market is pricing in a 5.4% swing in either direction for the day immediately after earnings.

From the looks of it, traders believe UAL will resolve to the upside. Over the past 20 sessions, options speculators have bought to open twice as many calls as puts at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). This call bias is echoed by open interest levels within the front three-months' series. Specifically, UAL's gamma-weighted Schaeffer's put/call open interest ratio (SOIR) registers at 0.43, with calls more than doubling puts.

The glass is half full elsewhere on the Street, too. For instance, eight of 11 analysts rate United Continental Holdings Inc (NYSE:UAL) a "buy" or better, with not a single "sell" opinion to be found. On top of that, short interest plummeted 18.3% during the last two reporting periods, and now accounts for a relatively slim 3.3% of the stock's outstanding float.

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