Here’s How to Trade American Airlines Stock at its Highs

The great rate scare of 2021 is trampling tech stocks and other high growth areas. But I’ll tell you who it isn’t hurting – airlines. American Airlines (NASDAQ:AAL) took off last month, and it hasn’t stopped ascending since. While it’s true, the recent market swoon has created some turbulence for AAL stock, and it’s been a tempest in a teacup compared to some of the destruction wreaked elsewhere.

American Airlines plane on ramp in Chicago Airport.Source: GagliardiPhotography /

Today we’re checking in on the airline industry to see how the major carriers are faring. They’ve essentially all morphed from laggards to leaders, and the relative strength has only improved in recent days. While the Nasdaq is plumbing the depths, AAL and friends continue to fly high at the top of their one-year charts.

To set the stage, let’s begin with a look at the Global Jets ETF (NYSEARCA:JETS). It’s the most liquid (and thus most popular) fund that tracks the major industry players.

Airline Stocks Remain Healthy

Global Jets ETF (JETS) chart with bull pennantSource: The thinkorswim® platform from TD Ameritrade

The daily chart hosts a gorgeous uptrend that just saw a sharp uptick in momentum. And this wasn’t some retail-driven affair. Institutions were in accumulation mode, driving the volume reading to the moon.

February was a banner month for shareholders, with gains echoing the profits that arrived last November following the Pfizer (NSYE:PFE) vaccine news. It’s the type of thrust that has staying power and makes you want to be a buyer of the next continuation pattern.

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Over the past week, a bullish pennant pattern has formed. The respite is well-deserved and allows JETS to digest recent gains and build a base for its next ascent. The 20-day moving average is quickly catching up but remains more than $1 below the current share price. Some additional backing and filling would be welcome. A breakout north of $27 or a dip toward $24 would be the ideal next trade setups.

On a cautionary note, the weekly chart of JETS does reveal we’re fast approaching some more serious overhead resistance around $27. This could bring supply into the market and stymie or at least slow further gains.

Global Jets ETF (JETS) weekly chart at resistanceSource: The thinkorswim® platform from TD Ameritrade

The AAL Stock Chart Is Holding Firm

The recovery in AAL has thus far lagged its peers. Optimists will argue it means the stock still has plenty of room to run before returning to its former heights. It has room to $25 before any longer-term resistance comes into play on the weekly time frame, so the argument has merit.

Pessimists contend the relative weakness means you’re better off chasing the leaders in the space, such as Delta Airlines (NYSE:DAL) or Southwest (NYSE:LUV). The recoveries in both have been far more robust.

American Airlines (AAL) chart with strong uptrendSource: The thinkorswim® platform from TD Ameritrade

Regardless of which camp you call home, there’s no denying the path of least resistance is still higher for AAL stock. As you’d expect, its price pattern is similar to that of JETS. February brought solid gains amid increasing volume. The past week has been choppy, but it’s not surprising given the stock’s overbought status.

If sellers press their advantage, the 20-day moving average and potential support near $18.60 are both logical targets for buyers to emerge. I suggest setting an alert at either level.

Of course, there’s a chance we continue to consolidate, and the next clean entry is a breakout over $22.50. Either way, I think the chart bears watching and, when a clean trigger presents itself, trading.

Bottom Line

The cheap price tag of AAL lends itself to a naked put play. You could enter now or wait for one of the two paths just mentioned to present itself.

The Trade: Sell the April $18 put for around 65 cents.

Consider it a bet that AAL remains above $18 for the next month.

On the date of publication, Tyler Craig did not have (either directly or indirectly) any positions in the securities mentioned in this article.

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