Southwest Airlines
Southwest (LUV) shares are plunging today after management announced that they’re planning to cut seating capacity, citing ongoing challenges from Boeing (BA) as the reason.
What’s worse, they also announced that they are rethinking the company’s 2024 financial forecasts, which is code for “providing lowered guidance.”
Of course there’s blood in the streets…
Investors are pushing the sell button and shares are already down 15%.
Today's decline has sliced through the stock’s 20-, 50- and 200-day moving averages within two trading days. The move may seem unimpressive until you look at the past data.
Since 1990, we’ve only seen 13 occasions where LUV shares broke through all three trendlines within two days. Each of these instances were ahead of massive declines in the stock that average more than -25%.
The last time this happened was in July of 2023, ahead of an additional 33% decline in Southwest Airlines shares.
In addition, LUV shares have broken back below their 20-month moving average with today’s move. A break below this long-term trendline signals that the stock has entered a long-term bear market trend.
Support for the stock appears to be 30% below current prices at $20, a round number.
Boeing
Shares of airline manufacturer Boeing (BA) are trading lower as the ripple effect from recent investigations are making news again.
Earlier this morning, the New York Times reported that an FAA audit has gleaned "dozens of issues" in 737 MAX production including 33 failures of 89 exams.
In a strange twist, a Boeing whistleblower was reportedly found dead, as reported by the BBC. This has nothing to do with the fundamentals of the stock, it’s just not a good look for the company.
Boeing shares are trading 5% lower on heavier volume.
Costco
We talked about Costco (COST) yesterday as shares were coming close to a 10% pullback after the company’s latest earnings report. Like clockwork, we’ve seen buyers enter the market to support shares near the stock’s 50-day moving average.
In our world, we consider a 10% pullback to a bullish technical trendline like the 50-day a “healthy correction” that often generates an opportunity to “buy the dip.” That appears to be the case with Costco shares this time around.
Watch for the stock to move back towards highs, especially as the market starts to consider the high likelihood of a membership fee increase in June.
About the Author
Chris Johnson (“CJ”), a seasoned equity and options analyst with nearly 30 years of experience, is celebrated for his quantitative expertise in quantifying investors’ sentiment to navigate Wall Street with a deeply rooted technical and contrarian trading style.