Airline stocks have been on quite the run lately, with United Airlines (UAL) and Delta Airlines (DAL) leading the charge post-earnings.
United has particularly skyrocketed — up about 110% since Aug. 5, and over 90% YTD — rallying to levels that seem almost unsustainable in the short term. After a strong earnings season where United delivered robust results and pushed prices higher, there’s now a clear question on the table…
Are we nearing a pullback?
Let’s start with United. Like I said, the stock has been on a relentless uptrend, and if we zoom in, it’s obvious that this isn’t just a slow climb…
United has had an aggressive upward move, testing new highs without hesitation. And here’s the thing — it’s tough to expect this momentum to continue without some sort of correction.
If United does climb back up to its old highs around $90 again, I’m ready to short it with a defined-risk option play, likely a bear put or bear call spread.
Defined-risk trades here are key.
United’s volatility may be the biggest risk factor to watch. These kinds of aggressive price moves — especially when coming off earnings or major catalysts — are prone to rebalancing. A defined-risk play allows me to capture profit on a short position without worrying about an open-ended downside risk, even if United’s stock keeps chugging higher.
Now, Delta’s story is a bit different but has similar implications for a short-term pullback.
Delta’s had a slight miss for earnings, but it hasn’t stopped the stock from gaining. Like United, it’s moving toward highs not seen since before the pandemic that make it feel more like we’re testing a ceiling than finding a floor.
I’m not looking to call the top, but with Delta, a pullback could create a healthy buy-the-dip opportunity. If we can get a retreat toward some of those moving averages — like the 50- or even the 100-day MAs — then I’d consider that a more favorable area to go long.
In other words, I’d much rather buy Delta’s dips than chase it at these highs.
It’s worth noting that the airline sector has some added risks these days — rising fuel costs, fluctuating travel demand, and an overall economic environment that’s, let’s face it, unpredictable.
But that’s exactly why we look for these short-term, defined-risk setups instead of jumping in headfirst.
Bottom line?
United and Delta are both on hot streaks, but I’m holding off on any outright bullish plays until we see a pullback. If United keeps climbing, a defined-risk short is in the cards.
For Delta, I’ll stay patient and look for a dip — ideally back into key moving averages — to catch a more stable long position.
I’ll see you in the markets.
Chris Pulver
Chris Pulver Trading
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*This is for informational and educational purposes only. There is inherent risk in trading, so trade at your own risk.
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