Delta Air Lines (NYSE:DAL) — US Airways Group (NYSE:LCC) led an industry-wide rally on Tuesday after executives said they have not yet seen any signs of a contracting economy in their September bookings and stated plans to reduce their seat capacity. Shares of airline stocks have been under severe pressure so far in 2011, and the Guggenheim Airline ETF (NYSE:FAA) is down almost 30% year to date.
Out of the group, the stock that caught my attention yesterday was Delta. The weekly chart turned down in January after the stock broke the uptrend dating back to early 2009, and has been trending down ever since.
The daily chart of DAL shows a wedge that yesterday resolved to the upside, and by doing so, the stock also broke back on top of its 50-day simple moving average (blue line).
Keeping in mind the high correlation among stocks and the broader market downtrend, Delta does offer a decent long-side entry here. Stops could be set near yesterday’s low of $7 with a price target at the downtrend line featured on the weekly chart above, currently coming in around $9.