Delta $DAL taking off for further gains

Delta has a very constructive fundamental valuation (see the bottom half of the chart) and a very constructive "accumulated position" on the charts to suggest "Blue Skies Ahead" for further gains in $DAL.

Fundamentally, you can see $DAL has $3.6 billion in "free cash flow" which is the real cash return you would earn if you owned the company outright (which is a simplistic, but more realistic view than just earnings). The market capitalization of $DAL is just over $30 billion, which means the current "Free cash flow yield" is 12% (3.6 billion/ 30 billion). That is a back-wards looking number but it is a high return given the alternatives that we can find in the universe of stocks.

Technically, $DAL has a price pattern that shows that investors have accumulated shares and are "in control" of those shares and are prepared to hold them off of the market until higher prices are realized in the marketplace. Why is this the case? It is all about how shares accumulate from sellers to buyer and how the price is displayed on the chart. The price where the most price action takes place is the "battleground" area and can be seen by the thin white line I have drawn in the chart across the $37-$36.75 price level from June until September. What happened at that price line is important, because it spent 10 weeks total there and when the market climbs above that level, it means that the sellers are likely done their selling and the buyers have taken over control. The way the pattern develops from the "battleground" area is to move away from that zone for the same amount of time that it spent at that level AND the size of the movement "at the battleground zone" is the approximate size of the advance from the battleground level.

The white box you see is the measurement of the movement around the 10-week white line from June to September and then it is moved to the end of the battleground level and used to measure the time and price of the advance.

These dual factors of fundamentals and "share price accumulation" give solid credence to a strategy to look for a move to $45-$45.50 over the ensuing 6 weeks. With $DAL at $41.17 now, that only represents a return of 10% in 6 weeks from current levels. If there are corrections back to the green arrow line drawn on the chart, then a much better risk/reward trade will set up as well and I will be looking to add to positions.

Other airlines including $JBLU, $LUV also support the $DAL chart.

Wishing you well,

Tim October 20, 2016 11:48AM EST

評論:

The price pattern is called "Time at Mode", also "Time@Mode" or TAM.

評論:

Still right on track at the top of the forecasted range.

$44.21 last.

Pre-election rally.

Nov 7 2016

評論:

I sold calls out to December's expiration at the money. With VIX elevated, that might be a good way to get a little more out of this trade.

交易結束：目標達成:

Beyond Target.

評論:

Warren Buffett was one of the major buyers of airline stocks that created the patterns in price that I picked up on. With low valuations, general fear of a recession and fear of rising oil prices amidst an oil supply glut, airline stocks were poised to bottom. Investors began to recognize that US Gov't Bonds yielding less than 2% are less attractive than an airline yielding 12%. With yields surging sharply since the election, companies with ONLY 4% or less earnings yields were sold sharply and investors are searching for more valuation cushion to protect them against further hikes in long term interest rates.

評論:

Be on the lookout for corrections and additional entries into airlines on any weakness. Given that "Warren Buffett SUPPORT" is down about 10% for these stocks, you may want to be prepared to buy on corrections. Alternatively, look to sell 6-month put options 10% out of the money for premiums of 5%-7%. I believe this is a reasonable way to capture decent risk-adjusted returns for the upcoming 12 months. If Airlines go down, the put option will enable a seller to "put you" the stock at the predetermined strike price and you will end up with your position. Options are tricky though, so it will have to be below the strike price at expiration to give you the highest likelihood of buying the shares. If you don't end up with shares after expiration, then you have earned the premium you collected at the beginning of the trade. In a world of nearly zero interest rates and less than 2% dividend yields, a 5% return for 6 months isn't too bad. Annualize that out and you have a 10% return for insuring against a 10% drop in airline stocks. Sure, we can get a big decline, but as it stands now, airlines are earnings well north of 10% returns on capital, which is enough to attract the likes of Warren Buffett in the first place. He will be buying on dips, most likely, and unless something drastic changes from a regulatory or economic standpoint, I think this is the way to approach it. Nov 17, 2016 8:39AM EST

評論:

finance.yahoo.c...ote/DAL/options?ltr=1&...

The June 42 strike puts are $2.50 last (yesterday's close). No guarantee that there are buyers at that price, it is a theoretical close which can be the mid-point between a bid and an ask from the market. Be wise and don't use "market orders" in options.

The $2.50 is a 5% yield on a $47 stock, but it is out 7 months from now.

評論:

Re-read the whole discussion from a year ago and see how it panned out.

Hope to have had a successful 2017.

Tim

Dec 3, 2017 9:55PM EST