Southwest Airlines Stock Lower on Bear Note

LUV shares are back below the 30-day moving average

Managing Editor
May 29, 2018 at 9:45 AM
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Southwest Airlines Co (NYSE:LUV) is trading lower after receiving a price-target cut from Citigroup to $64 from $67. The bear note comes less than a week after more harrowing details were released on the airliner's April 17 emergency landing of a Boeing 737 in Philadelphia. In response, LUV is down 1.1% at $52.27.

This puts the stock back below the 30-day moving average, a previous level of resistance. The airliner has been since December, touching an eight-month low of $50.20 last Wednesday. Overall, Southwest Airlines stock has shed more than 19% year-to-date.

Despite its recent underperformance on the charts, analysts following LUV have been overwhelmingly optimistic. Of the 16 in coverage, 13 sport "buy" or "strong buy" ratings. Further, the average 12-month price target of $67.67 represents a 28% premium to last Friday's close.

As for options data, the security's Schaeffer's put/call open interest ratio (SOIR) of 0.31 ranks below all comparable readings from the past year. In simpler terms, this means that short-term speculators have almost never been more call-skewed. Meanwhile, LUV has a Schaeffer's Volatility Scorecard (SVS) reading of 85 out of a possible 100, showing the shares have tended to make outsized moves over the past year, relative to what the options market had priced in -- a boon to potential premium buyers.

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