United Airlines Holdings, Inc. (UAL) has just confirmed the fears that the push COVID-19 case undermines the hopes of a quick recovery after the first quarter of mass production to a standstill. In a July 6 “Town hall” employee of the event, the carrier has revealed that July’s consolidated capacity is likely to contract by 75% year on year, following an 88% drop in June. In addition, the United warned that the month of August of the orientation of 65% is likely to mark a peak performance at the 2020 horizon, the volume of passengers, with little or no improvement through the end of the year.
United stock fell after the news, selling in five weeks, the support near $31.00. More importantly, the accumulation-distribution readings crashed in the last month, falling to within striking distance of the bass, which has found the support of less than 30 cents above March’s eight-year low. Support tends to weaken each time it is tested, increasing the threat of a possible rupture, the drops of Organisation of the actions to levels not seen since 2009.
It took almost eight years for the Organization of actions to complete a round trip in the 2007 high above$ 50, which gives a modest 2015 breakout head to the mid-$70’s, a few months later. A low in the $ 30s in 2016, stirred the interest of buyers, before 2017 increase that was lame in December 2018 all-time high of $97.85. Price action is held in a narrow trading range in 2019, and finally, to leave place to a February 2020 rupture which ended in the three points of the 2011 low in March.
The downtick reversed at the .786 Fibonacci retracement of the nine-year upward trend, a common turning point, but the second-quarter rebound failed to break the .382 sale retracement level. It is currently trading at about half of the distance between the lows of March and June, with the share price growing heavier by the day. The monthly stochastic oscillator has failed to enter a buying cycle during this period, despite a rally of more than 30 points, emphasizing strongly bearish techniques that promote low prices.
American Airlines Moves Closer To The Downtrend Low
The proclamation of the Kingdom-raises doubts about the plans of rival American Airlines Group Inc. (AAL) of the increase of the capacity of the summer after optimistic remarks about May and June of the traffic. The recent willingness of these companies to make contracts with the federal government for loans also suggest a dimmer view of the outlook for the future, because the bailouts will generate a further dilution through warrants issued to the U.s. Treasury.
American Airlines shareholders have come out since the 1st of July to the announcement of the increase of the capacity of dumping the stock to a five-week low. It is now trading at less than four points above Can-six-year low, the exposure of the bearish trend to a rupture which could possibly test the 2008 low price of$ 1.45. It is a small step from this level of prices, bankruptcy, or a loan-induced zombie state, which persists well beyond the current crisis.
Shares of American Airlines, posted a record high of $63.27 in 2006 and sold at a price of $1.45 during the economic crisis of 2008. A two-legged advance stalled within seven points of the high in 2015, leaving room for a pullback to sculpt a trading range with support in the mid$20. In April 2018 breakout attempt has failed, the strengthening of the resistance of the range while establishing a selling wave that broke out in support in February 2020, which gives a vertical decline in the lowest since 2012.
The decline has broken its support at the .786 Fibonacci massive sale retracement level near$ 14, while the price action since the May low has been testing this critical level, with a failure of the setting the stage for the continuation of the decline in 2008 all-time low in the single digits. Such as United, American accumulation of readings fell in an aggressive shareholder exodus, while in the long-term relative strength indicators have failed to respond to a high percentage of short covering rally.
The Bottom Line
United Airlines warned employees that the volume of passengers is likely to stagnate through the end of the year after a slight second-quarter earnings.
Disclosure: The author held no positions in the aforementioned securities at the time of publication.