After a steady win streak, we do hold some losses. But we’re continuing to hold them all. As we wait for them to pan out, as they should, we do want to add a long-term trade on airline downside.
The biggest reason airlines stocks – like United Continental (UAL) and American Airlines (AAL) – are up is because oil prices died off. In fact, light crude is down another $1.66 on the day to $67.65, plunging from 2014 highs of just above $106. While most of us like the idea of cheaper oil, it’s become much too oversold.
At some point, oil prices will turn higher. Even RSI is screaming, “I’m oversold,” as it sits under 2008 lows of 15.6.
While we are looking at other potential trades for Forgotten Profits, we want to make sure we establish a position in airline stocks that are incredibly, technically overstretched. When oil does bounce – and it will – airlines stocks like UAL will revert back to mean.
We just have to be patient with this trade, though. We have to be patient with the entire market at this point because it’s massively overbought, despite underlying economic weakness.
Consider buying to open the American Airlines (AAL) May 2015 46 put up to $4.80.
Hold all other open positions, as well. We have an eye on other trades, too. But are just waiting for market conditions to calm down. Rushing a trade is never good.
Ian L. Cooper
Forgotten Profits