Delta Air Lines, Inc. (DAL), the airline giant, has made its stocks a classic Wedge pattern. A wedge pattern falls off resistance Level and rising support Line leading the stock to a breakout point. The trick is to figure out which direction stocks will ultimately move.
By and large, airlines are one of the weakest sectors in the market. Delta stock is still trading 45% below its pre-March high. And you can’t blame investors for not knowing what to do with this stock.
Although air traffic is increasing, the sector is still suffering. And without spending more money on the airlines, they expect to lay off thousands of employees by the end of the year. The longer it takes for the United States to return to normal, the greater the uncertainty around airlines.
With Delta currently trading in a wedge pattern, we should see a breakout in the coming weeks. Take a look at the sample in this pricing table:
The resistance level is red and the button support is green. At some point in the next few weeks, one of these key levels is likely to break, signaling where Delta shares are going next.
Wedge formations are great for pricing the breakouts as we can get the expected movement by taking the height of the pattern. In this case, it’s $ 20 per share. If we get an upside breakout, the stock will climb to the $ 50 mark – more than a 50 percent rally. However, if stocks continue to show weakness and trend lower, let’s say the stock hits $ 10 per share over the next few months – a drop of a whopping 66%.
We cannot ignore the fact that Delta stocks are still 45% below their pre-March high, while broad market indices have rallied to new highs. That weakness could suggest that Delta will hit $ 10 per share for the first time since 2012.
The bottom line
Delta stocks trade in a wedge pattern that is on the verge of a major breakout. We just don’t know which way to go. The up target is $ 54 per share while the down target is only $ 10 per share.