LUV Daily Tightening RangeLUV is clearly tightening on the daily timeframe with a series of lower highs and higher lows, forming an equilibrium pattern, triangle, whatever you want to call it. The point is that the break is imminent and it’s direction will likely be dictated by the stock price’s reaction to earnings next week.
The most important levels right now are 29.73 support (and 29.15, the dump low, which is so close to 29.73 that if we break 29.73 we are also likely to break 29.15) and 37.31 resistance, then 43.56 resistance. Bulls are going to have a harder time than the bears on a bull break of 37.31 simply because the next resistance is so far away whereas bears can slice through both supports at once if we break down from here.
From here I would fully expect another higher low to be set in a few days in order for the range to continue to tighten. Look for a trend change on the hourly from lower highs and lower lows to higher lows and higher highs to signal that the daily higher low is set.
About the break: the bears have the weekly and monthly down trends in their favor. However, for monthly chart, this the first time since 2012 that RSI is around 30 (oversold levels) so I would expect a monthly oversold bounce to take place before we can continue to lower lows. Whether that monthly bounce comes on a bull break of this daily equilibrium or a rally from the lows after this equilibrium breaks bearish I can’t say.
We are closer to breaking support than we are to resistance right now, but I am expecting a daily higher low to form and a bounce to potentially form a daily lower high after that.
Compared to other airlines (UAL, DAL, AAL) LUV stood out during the dump as the most resilient. On the one hand, I might expect LUV to be a lead bull if this equilibrium breaks bullish due to how well relatively it fared vs other airlines but on the other hand, there is a huge zone of previous support now resistance at ~$45 level. Compare this to other airlines which barely formed any support on the way down and will therefore have much less resistance on the way up if we do break bullish from here.
Thanks for reading. Hope this makes sense.
