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 ). 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
Nov 7 2016
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.
Thank you for sharing the information, so far your call looks excellent. One question though based on your thoughts
>>the "battleground" area and can be seen by the thin white line I have drawn in the chart across the $37-$36.75
This looks like similar to market profile, anyways can you please share how were you able to plot the horizontal line, is that something available from tradingview which we can use or your proprietary code
I plotted the white line myself because I am able to quickly "see" where the most frequent price is using time just like Market Profile. I count the time at the mode, then start counting when a range expansion <or> a range is completely above (for an uptrend) or below (for a downtrend) the mode to start the countdown for the trend away from the mode. You can use "volume profile" until my "time at price" gets programmed, like "market profile".
* Slightly declining revenues but solid cash generation.
* Margins are solid (flat is ok)
* P/S is increasing because the stock is rising.
* FCF is solid at high levels.
* The high volume level is at $45.50, my upside target.
The other names in the group look constructive also: JBLU, LUV.