Rising Airlines UAL LONG - Dec 23 (🐲🏔️JDSMF)
After a few months taking a step back, exploring, reading and losing. This is the first trade in my new fund 🐲🏔️JDSMF. We are now looking at swing trades based on opportunities derived from exploiting the gap between the market's expectation for how things will turn out (current price) and our own belief of how things will turn out. Good luck to me!
The Hypothesis
The worst is over for the airline sector since it’s constant free fall since 24 Jul 2023 - Late Oct. After 4 months of dropping -42%.
- I believe that all the key issues have been priced into the stock.
- Consumer Demand
- Oil has also seen a drop in prices since 2 Oct 2023
The Fair Price
- Generally
UAL
JETS
What Factors Would Break This Hypothesis
The Hypothesis
The worst is over for the airline sector since it’s constant free fall since 24 Jul 2023 - Late Oct. After 4 months of dropping -42%.
- I believe that all the key issues have been priced into the stock.
- Labour
- Oil
- Ticket discounts
- Consumer Demand
- No airline has shown slowing demand. In fact everyone of them has reported growing demand in both domestic and international.
- All have reported revenue increases
- Oil has also seen a drop in prices since 2 Oct 2023
The Fair Price
- Generally
- For all airlines current price low is 40-60% away from COVID low, COVID low was a fear reaction
- But if we plot current price to price stabilisation after the COVID fear reaction, we were at parity 4-6 weeks ago
UAL
- UAL has strong business plan and fundamentals
- COVID low is 56% away - I will put my initial risk at 56%
- Base Price
- - As a base I used the low of the range that happened after the COVID dip in 22 Jun 2020. This was where price stabilised from the fear and then slowly moved higher.
- - 7 Dec - Price is 21% from COVID stabilisation
JETS
- JETS is a safer bet on the overall airline industry
- I contemplated JETS, but JETS had a bad Risk & Reward just based off COVID Stabilisation and July’s price before the dip 24%: 16.39%.
What Factors Would Break This Hypothesis
- Oil prices, suddenly shoots up
- Customer travel demand drops due to recessions of tightening
- Labour prices shoot up cutting into margins
Trade active:
We need price to establish a new S&R so that we can move the initial SL to breakeven
Trade closed: stop reached:
Trade close with a small profit