Last week airlines stocks were the talk of the town. The news of oil being down 8 days in a row, capacities being in line with future expectations, combined with some breaking news for AMR about possible overseas connections in the future set the table for a volatile move higher.
However, the obvious presents itself when all these factors stand to attention at the same time. Is the move over done? We called AMR a buy at 5.50. It’s trading at over 40% gain from this buy signal. The larger trend is not done at all in AMR, but the move last friday could have been the result of this outpouring of news and technically an irregular correction.
There is no way to tell at this point. AMR weakness this Monday morning does get traders thinking though if too much too fast has occurred.
Basically if an irregular correction is taking place, the move from 6.83 to the high of 7.97 so far today, deviated from what was expected. If this is the case, AMR will continue to fall as it is so far today to 6.50, 6.34 before heading to our larger profit price target of 8.83. If this analysis is off, then the shallow correction to 6.83 concluded the correction until the 8.83 target is reached.
The chart below shows in green what was expected to happen, and in purple what a possible irregular correction would look like. The lines added are drawn without time frame in mind and are only meant to diagram possible price motion of the two expected events.
