fbpx

COVID-19 hit the economy hard!

And if there’s one place where they can tell you all about it – it’s the travel sector.

It’s hard to imagine that business across an entire global industry can come to a screeching halt virtually overnight.

Yet, that’s exactly what happened here: cruise ships, airlines, hotels, booking agencies, you name it, have all seen the demand plummet by as much as 95% in the first few months of the pandemic. 

Now, in all fairness, those times of complete despair are long gone – as of the past half a year, we’ve definitely been in the recovery mode and as bumpy as this road may be, there’s surely light at the end of the tunnel. 

The market has noticed – most of the sub sectors of the travel industry are hitting the highs in the expectation of booming demand ahead.

Most, but not all!

There’s one big sector that lagged behind, but I’m happy to report this may all be about to change. 

Let me tell you what, how and why…

The Big 3 US Airlines

Being a passenger airline is not a fun thing even when the demand is booming.

The business is overleveraged, the competition is fierce, the margins are razor-thin. 

But that’s all fun and games compared to being a passenger airline in the middle of a pandemic. 

You’re still on the hook for all the payments and expenses: aircraft leases, airport parking fees, employee salaries… except that now your sources of revenue are almost non-existent. 

It’s been a struggle for US airlines, many of them have significantly shrunk fleets, and we’ve all heard about the tens of billions of dollars of the combined bail out money they’ve gotten. 

Still, in terms of damage done, the Big 3 US airlines – United Airlines, Delta Airlines, and American Airlines – stand out.

And the reason is simple – they have (or had, pre-pandemic) a HUGE international presence. 

Here’s some good graphics I found in a Forbes article, showing the domestic vs international revenues splits for the Big 3 US carriers:

Before the pandemic, the 3 of them have generated around $40B in international revenue, or nearly a third of all the revenue they brought in!

Now, keep in mind, through most of COVID, the US has had blanket travel restrictions for virtually all foreigners – and so have the foreigh countries for Americans.

With most lucrative international markets such as China (and most of Asia, for that matter) and EU completely cut off – these 3 airlines have surely found themselves in a bit of hot waters, even when compared to the struggling domestic ones like Southwest and Jetblue.

Well, the good news is, they better buckle up, prepare for take off and enjoy the flight.

US to Lift Travel Restrictions for Vaccinated Travellers

Earlier today, Reuters reported that according to a White House official, the Biden Administration will lift travel restrictions for fully vaccinated foreign travelers on Nov 8th of this year, or, in about 3 weeks from now.

There have been plenty of rumors about this recently, but now it seems we might finally get the official announcement. 

And that’s a big deal, if you care to hear my take!

And it’s not just me that’s getting optimistic!

Just yesterday, United Airlines announced 8 new long-haul international routes for the 2022 season.

A few days before that, Delta announced a 5-route expansion out of Boston.

You see where I’m going with this – the airlines can’t wait to put those planes back to good use, and fill in the expensive international premium seats.

Well, this decision by the Biden Administration has just gotten us one huge step closer to that.

What To Expect

The charts of United, Delta and American are quite similar, but, more importantly, they all share the unflattering distinctive features:

  • All 3 remain far off the pre-pandemic highs.
  • All 3 have been shaping up for a move higher.
  • All 3 have failed at it multiple times.

I think this announcement has the potential to finally turn the page for the Big 3 US airlines, allow them to find stronger support and get moving higher. 

Each push they’ve had so far turned up a failure. Let’s see if an industry-wide catalyst can get the job done.

Here are some key levels I’ll closely watching in the coming days and weeks:

United Airlines – UAL:

As we’ve seen above, United has by far the greatest exposure to international traffic – therefore, I think it’s UAL that may see the biggest reaction. 

UAL also has one of the better charts among the three. 

United also happens to have nearly all of its workforce vaccinated, meaning it won’t be materially affected by any labor shortage-related disruptions.

$48 area that it’s currently trading at has been a big level for the stock, and I think right now may be the perfect time for it to hold the support and start a move higher. 

If we get a solid consolidation above, I will consider a long against $48 for a move into $59. 

Delta Airlines – DAL:

The $42 area has been a big level throughout. The stock may finally be ready to bounce off of it and see meaningful upside. 

I’d love to see it establish above $42 – once that happens, I may consider an entry with a target at $48.

American Airlines – AAL:

American Airlines is the last on the list for a good reason – it’s the choppiest of all.

Still, if the sector gets going, AAL can get going as well. 

I’m interested above $20 and even more interested above $21. Under the right circumstances, I think we can see $24-$25 fairly soon. 

Author: Jason Bond

If you’ve followed me for some time, you’ll l know I’m always on the hunt for good reversal trades.

Picking bottoms is no easy task, but the truth of the matter is, a well-timed reversal entry may end up on the list of your most lucrative trades – true bottoms provide very limited risk and huge and quick upside.

But then there’s the flipside of the coin: you have to be very careful through the trade, as you never know if the stock has really quit going down.

I would personally never enter a beaten-down name unless I see it find support and give me some kind of confirmation that it’s ready to finally uptick.

Well, I’m glad to report I just found one such ticker!

What makes it even more exciting: it’s a well-known name, in an ever-hot industry with plenty of short interest – all that good stuff that we, momentum traders, appreciate!

Let me introduce…

BeyondMeat – BYND

I’m sure many of you have recognized the ticker by now, but for those who haven’t, let me cover some basics about the company first.

BeyondMeat is the producer of plant-based meat substitutes.

That’s right: if you love eating meat… without actually eating meat, BYND has your back!

The company is one of the market leaders in plant-based meat substitutes and offers a wide range of product lines with the most famous ones being Beyond Burger, Beyond Sausage, and Beyond Meatballs.

BeyondMeat also collaborates with many of our favorite fast-food chains, such as McDonald’s, Dunkin’ Donuts, Taco Bell, and KFC, to name a few.

In a world with an ever-increasing focus on healthier, oftentimes vegan food options, all of the above makeup for quite a resume for a public company!

Needless to say, investors have been paying attention – during its 2019 Initial Public Offering, the stock pulled off one of the most impressive post-IPO performances ever, as it went from $45 to nearly $240 in a matter of 3 short months:

The fun has barely slowed down since, as BYND maintains the volatility and is a regular on the screens of many traders.

What’s The Story

Ok, I get it, the company is cool and its IPO was great, but why do I care?

Well, there are a few reasons.

First, unlike many super hot IPOs (cannabis stocks quickly come to mind) that popped to highs and sold off into oblivion, BYND has kinda maintained the range:

The entire time, it’s traded far above the IPO price and has a history of violent moves higher.

Second, the industry is as hot as ever, and the company continues to roll out new product offerings, as well as partnerships with Tier 1 brands.

Third, and this one matter a lot, the chart! Let’s zoom in on the image from above:

The stock is down over 50% since the beginning of the year, and it’s been a pretty straightforward downtrend – that surely qualifies as “beaten down.”

But what get’s me really interested is where it’s trading right now – as you can see above, it’s fallen right into a big support area at $100.

It’s been holding up so far and is trying to grind higher today, following a news catalyst.

Oh, and did I mention everyone’s favorite – 26% short interest?

What To Expect & What to Watch

So, how do we trade it?

As I mentioned, with reversals I don’t like to guess – before I make any decision, I want to see support and confirmation.

I believe the stock is slowly but steadily giving us both.

I’ve already explained the support above, that one is pretty obvious. Now, let’s zoom in even closer to look for confirmation:

I like the fact that BYND has so far had multiple breakdown attempts, and failed at them each time – that’s a good sign, as it signals good demand at support.

At this point, I need to see it build up at higher levels & to break the downtrend – if that happens, I think we can have a major move, as momentum traders will jump on, while some short traders will get squeezed out.

BYND is trying to do just that this morning following CNBC news that McDonald’s will start testing McPlant Burger created with Beyond Meat in eight restaurants next month.

I’m not convinced just yet, but I will be watching the $105 level very closely, ideally, I want the stock to never drop below again.

My line in the sand remains below $100, and my target for a potential bounce is $140.

Let’s see how this plays out over the next few weeks.

Author: Jason Bond

Franklin D. Roosevelt once said: “There are as many opinions as there are experts.”

Something similar is true about the stock market – there are just as many strategies and ways to trade it as there are traders. 

We may be entering the same name and for similar reasons, but still, we all run our own sets of indicators, tools, and thought processes. 

I, for one, try to go into great detail explaining the things that matter most to my style: Moving Averages, ATRs, Oversold & Overbought areas, different types of advanced options trades, to name a few. 

But then, there are a few really basic things that, in my view, lay the foundation and cover the basics for a great number of intraday strategies. 

Let me share with you 3 data points I always look at, before making any major trade decisions. 

Volume

Volume is simple – in fact, it’s possibly the simplest and most basic stock metric a trader can look at.

Yet, oftentimes, it may be among the most important ones out there for a short-term trader.

See, volume is your quickest and most reliable way to assess 2 key characteristics of a move: liquidity and the bigger picture investor sentiment.  

If we’re talking liquidity, one part of it is obvious: the more shares change hands, the greater number of people participate in the move, and the easier it will be to get in and out of a trade. 

Liquidity matters a lot when trading small-cap names, even if your account isn’t very big – trust me, it’s never fun to get slipped 5-10c even on a low share count. 

The second part ties into the “bigger picture investor sentiment.”

See, as a move is happening and a stock is advancing – you’d generally want to see the volume pick up as well. 

This signals one major thing: more market participants, big and small, are accepting the new price point and are willingly getting involved. 

If you look at most major movers, you’ll notice the volume has been on a steady uptrend as the move developed. 

Before I enter a trade, I always check the longer-term chart to get an idea of volume history and and assess whether it’s in an uptrend or a downtrend – that way I know if interest in a stock is rising and if new price levels are getting accepted by an increasing number of people.

Long-Term Price Levels

As you sit glued to your screens, watching every tick and counting every penny, it’s very easy to get caught up in the moment and lose track of what’s going on in the bigger picture. And in trading, the big picture does matter quite a lot. 

A common mistake I see newer traders make is focusing on immediate price action and failing to note and mark important longer-term chart levels – areas where a stock is likely to find support or resistance in its intraday moves. 

You may be entering the cleanest looking intraday breakout higher – only to find out there is a major long-term resistance level not far above your entry. 

If you’re trading Tesla (TSLA) breakout today, you should know you’re not just fighting yesterday’s high:

You’re also dealing with a major $804 area from TSLA’s long-term chart:

One thing I’ve made a habit of is to always check the daily and weekly charts, before I enter any trade, and see if there are any major levels in the vicinity of a current price range. 

If I find one, I always mark it on the chart, virtually any trading software allows that – this way I have all major inflation points in front of my eyes and know where my stock may have troubles.

VWAP

VWAP stands for Volume Weighted Average Price and it’s one indicator that I think every trader should have on their screen. 

VWAP is a product of fairly straightforward arithmetic:

VWAP = SUM All Transactions (Shares * Price) / Total Shares Traded

What you get as a result is the average price at which shares changed hands that day. On a chart it looks something like this:

VWAP matters for a simple reason – it can quickly tell you which side of the market is in control. 

Think of it this way: 

  • If a stock trades Under VWAP – your average buyer is underwater
  • If a stock trades Above VWAP – your average short seller is underwater

Knowing and understanding this information can be a great insight into the immediate underlying supply-demand dynamic of a stock, and may benefit virtually any trader. 

Author: Jason Bond