American Airlines (AALWealth Strength IndexAAL is Moderately Flat and trending Up) is another of those stocks in long term decline and bucking the recent broad trends for US stocks, with last week’s price action a pivotal one as we approach the second half of the year, where once again we have a confluence of technical factors acting in concert.
First, the weekly chart for the stock exhibits the classic rounded tops of lower highs as each attempt to rally runs out of steam before rolling over and descending into the next leg of an extended bearish trend, punctuated only by ‘buyers of value’ who perceive the stock as cheap. After all, the stock has now halved in value since 2018 and as the price continues to fall, so buyers are drawn in and duly trapped in weak positions. The latest of these rallies occurred in April and into early May, before two gapped down weeks of price action injected momentum into the move lower, with last week’s price action particularly significant with the effort to rise followed by the close on the lows of the session thereby delivering a deep wick to the upper body of the candle. Equally significant however has been the breach of potential support at $30 per share which was duly breached. This was a strong platform and one that had acted as support in the past. Not this time, and with the stock now trading at $28.76 per share at the time of writing, is now acting as strong resistance.
Next, consider the volume associated with the current down candles – it is rising as the price falls, a portent of more to come as the market makers continue to sell heavily as we break away from the volume point of control at $31.80. To the downside, we also have a low volume node immediately ahead, and with little in the way of either price based or volume based support available, expect to see this stock fall further in the coming weeks. Finally, if this were not enough, note how the Quantum Trading trend monitor indicator continues to signal a bearish picture, a sentiment maintained even through the rallies on the way lower, and never transitioning to bright blue.
By Anna Coulling
Charts from NinjaTrader and indicators from Quantum Trading