Overview of the Market
Aviation and Aerospace stocks last week performed as a whole. We are seeing some recovering in the market from the Corona Virus impacting global economy.
We saw less flight routes towards the pacific rim of the world as the fear associated with the deadly virus reached the global scale. Hotel and tourism industries calm to an almost complete stand still as man trips were cancelled. Casinos in Macau shut down completely for the last 15 days as the city worked to contain the spread of the virus.
Today we are seeing conversations about potentially opening the hotels and casinos again as there has been no confirmed cases in the city for the last week.
Virgin Galactic Holdings (NYSE: SPCE) is one of the big winners of the week having increased 39.56%. Trading volume is playing a large role in the current surge of the price of the stock. With more investors and funds looking at the potential to participate in the commercial space industry Virgin Galactic being one of the first major Space Industry stocks makes it a prime pick for investors. We are all watching this rocket take off right now and looking to see how much jet fuel is left in the tanks.
To see the full list of all the stock on our Watchlist click the link below!
Some of the other stocks up for the week include but are not limited to Expedia (EXPD) which had a strong week up 12.96% as the experienced travel orders start to pick up. JetBlue (JBLU() was up 6.24% for the week and Azul (AZUL) following close behind up 6% for the week.
Over all the stocks that had a positive week the majority to see an increase in price are tourism, space, or airline related. Manufacturers saw some of the largest losses last week over all in the aviation market.
When we look at Airbus group (EADSY) down at -5.68% for the week, Boeing (BA) down -1.21% for the week and Textron down -4.72%. Boeing main supplier of fuselage and wing pieces Spirit Aerosystems is down -2.19% last week as they are experiencing some major production issues with the grounding of the 737 MAX.
As volatility goes up so does fear. As fear goes up investors look to secure profits and reduce exposure to risk. As volatility goes down fear is reduced which as a result attracts more investors to the market.
As growth sentiment remains strong there are many conflicts in our current industry that require corrective action to allow for the market to continue to grow optimistically. Looking to watch the volatility of the market is going to be a key factor for this year. With any slight hiccup in the market the media can expedite the results into the market.
News in Spotlight
Over the next week we have a few stocks schedule to release some significant earnings reports. This information will give us insight towards where the stock is headed.
Having a clear understanding of direction allows us to be able to accurately trade the market in the direction of the stock movement.
Spirit Aerosystems (NYSE: SPR)
Over the last year as a whole Spirit Aerosystems holdings Inc. has been down from its high back in FEB 2019 of $100 a share to current prices of $67.9 a share. Near the end of the year in 2019 price of the stock came up towards $92 just to stall out and drop down again.
Optimism around this stock is low based on the correlation it has with the Boeing 737 MAX. That does not directly impact the valuation of the company. Analyst are still holding firm with their target price of over $85 a share.
Although the market analyst have a target price which would suggest this stock is currently undervalued unless there is an approval for Boeing to continue production metal fuselages will continue to sit out on the ramp.
Today Feb 17th we are expected to hear the earnings report be release. Looking to see how their last quarter performed will really paint a clear picture as to what investors are looking to expect for the year to come.
Expeditors Washington (NYSE: EXPD)
Expeditors International of Washington Inc (EXPD) is one largest international freight forwarding firms in the world. Providing third-party logistics solutions and operating out of over 150 full-service offices Expeditors plays a large role in connecting customers and supplies with shippers.
Many overnight deliveries are done via aircraft and having a consistent flow of cargo being delivered via air keeps certain airports running and airlines flying. Part of investing in one industry such as aviation is understanding the supporting industries that aid business operations.
On Tuesday Feb 18th Expeditors Washington will be announcing their earnings report. Looking to see a strong quarter will aid the growth of Cargo airlines and commercial airlines with cargo divisions. Year over year growth in cargo is a significant factor to consider when we look at seasonal growth as the market has cycles for times of the year.
For many cargo companies the last quarter of the year is their strongest and the first quarter of the year is their slowest. So many investors are looking for a strong earnings report of 2019. Should the stock fail to report positive earnings one can expect to see a direct correlation to transportation and logistics related companies.
Atlas Air Worldwide (NYSE: AAWW)
Atlas Air Worldwide stock has settled down towards major lows for the last 6 months. Having been initially affected with trade war discussions between the United States and China they experienced a significant decrease in goods being delivered directly from China to the U.S.
When we look at Atlas from a technical perspective we can see how the higher lows could potentially lead to a bullish surge in price. They are scheduled to announce their 4th quarter earnings for 2019 on Thursday Feb 20th.
We can see how price is currently testing below the previous resistance that we have been trading underneath since late August 2019. This earnings report has the potential to bring the price of Atlas up back towards previous trading ranges. Should there be an actual revenue over forecast will be the first factor of consideration. The second being their EPS (Earnings per share) and lastly their future forecast.
Now that we have seen optimism in conversations between the United States and China we can expect to have a healthy year ahead for transportation and logistics.
Vuela (NYSE: VLRS)
Vuela Compania De Aviacion is the parent company to Volaris Airlines which is based out of Mexico. The airline is an ultra-low-cost Carrier (ULCC) providing affordable transportation throughout Mexico, and certain location in the United States and South America.
The airline does not use the hub and spoke method that many airlines operate with instead they offer direct routes from more secondary airports with lower operating cost. The airline understands the markets they serve and fit the needs of its guest by offering services that they will use.
Flying a fleet of primarily Airbus they operate mainly A319, A320 and A321. The price of the stock has been making a healthy recovering from its previous all time lows.
The Fibonacci channel tool allows us to be able to easily see key zones in the market. We are able to see using the algorithm in the software the percentage gradients that hold higher probability levels than others. We can see how price is currently sitting right on one of the key levels in the Fibonacci channel.
When we see price sitting right on the line and there is a bit of uncertainty towards the direction of the next trading day then we need to properly analyze the scenarios to determine a bias.
If we are unable to determine a bias certain options strategies can be used to be able to profit based on time passing like selling out of the money calls or puts.
Down at the bottom of the chart I have the MACD indicator on. We can see how the lines are sitting up near the high and the range on the bottom is pulling up towards the overbought area. As the stock continues to be overbought we will see price rise higher.
Only when we have the MACD curve downwards and the overbought signal flip toward oversold can we begin to see a major transition downwards. Until then based on the technical elements on display the sentiment will be strong for the next few trading day overall.
There may be some natural pullbacks in the market that will come which is why its important to develop patience for your trading time frame.
Make sure to sign up for notifications as this week we will be going over each of the companies earnings reports to give a quick analysis on how you can best trade the news.
We appreciate you for taking the time to join us on the journey of flying safe and flying often. Happy Trading!
As a disclaimer all trade ideas are for education purposes and not meant to be used as financial advise. All investing involve risks, including loss of principal. Past performances do not guarantee future results or success. Stock and Forex markets are volatile and can decline significantly in response to adverse regulatory, market, economic development. Asset allocation and diversification do not eliminate risk. All Content is used for illustrative purposes and for educational use only.