I bought a large position in Alaska Airlines ($ALK) this morning. This is a momentum swing trade based on numerous factors. First, as the price of oil continues to drop the airlines are not passing these savings onto their customers! This price gouging is likely to cause increased earnings in a lot of airline stocks – and Delta airlines did just report much improved quarterly earnings! Delta stock is soaring and taking many other airline stocks with it. So this is my underlying thesis – an earnings play essentially. However, I like to back up my speculative strategy with solid momentum chart indicators.
The weekly chart for $ALK shows classic momentum indicators – the stock is trading above the 4ema and RSI is above 70. The daily chart also confirms this momentum. The gap up today on higher than average volume is also a bullish sign. I will monitor the stock through out the day and would ideally like to see it close above the 4ema and maintain the RSI > 70. Additionally since I am essentially playing the buyable gap, I would like to see the daily volume be at least 150% that of the normal daily volume. My stop loss is the 4ema. I do love this chart as their is no overhead resistance and a clear uptrend.
$ALK does report quarterly earnings on the 22nd January and I do not hold through earnings so I will be selling most of this position before earnings. However, I may hold a little position through earnings if the stock price action seems extremely strong but I will lock in some gains (or close it out for a loss) before earnings. I was a little late spotting this stock so my entry is not that great – my position is averaged at $64 per share. The market is down 200 points today and this stock still seems very strong – this in my mind is a very good indicator too. Of course nothing is for sure but I think this gets a good run into earnings and my initial price target is $70 share.