Long Airlines if we expect oil to pull-back

[Pascal]

In the weekly comment, I wrote that LUV/UAL could be good long trades, especially if we expect oil to pull-back.

I therefore passed three airlines (LUV/DAL/UAL) through the Breakout Calculator in order to find the best entry price.

We can see that the three airlines have experienced strong uptrends.

28477

28476

28484

Their respective EV pattern also look good.

28479

28478

28482

However, the Breakout Calculator shows that only deep pull-backs are interesting to buy.
Shallow pull-backs to the 5MA are not enough.

DAL:

28480


UAL

28481

LUV

28483

I believe that these are not very good probabilities, because to reach such oversold levels, we would need oil to break above the current resistance level. If oil breaks over resistance, then airlines will be pushed much lower into a deep negative momentum that will make them impossible to buy.

Hence, the Breakout Calculator says that based on the past two years of data, it does not make sense to buy these airlines here.