Delta Air Lines (DAL) Approaches Key Decision Point

By Justin Kuepper
Published September 15, 2020

Delta Air Lines, Inc. (DAL) shares rose more than 3% during Tuesday's session after Seaport Global Securities initiated coverage on the stock with a Buy rating and a price target of $43.00 per share.

Key Takeaways

  • Delta Air Lines moved higher after Seaport initiated coverage on the stock with a Buy rating and a $43.00 price target.
  • The analyst believes that the market fails to appreciate the company's ability to recover from the COVID-19 pandemic.
  • The stock stands at a key technical inflection point, with a rising wedge pattern pointing to an upcoming directional decision.

Analyst Daniel McKenzie believes that the market fails to appreciate Delta's ability to recover from the COVID-19 pandemic. With a leading position in lucrative markets and hub dominance, the company may be in a strong position as it right-sizes its network and streamlines its cost structure to become more efficient and profitable.

Tip

A furlough is a temporary layoff, an involuntary leave, or another modification of normal working hours without pay for a specified duration. Businesses use furloughs for a variety of reasons, such as plant shutdowns, or when a broad reorganization makes it unclear which employees will be retained.

Delta CEO Ed Bastian also announced that it would not furlough its frontline workers following a successfully response to early retirement and departure packages offered this summer. Meanwhile, the company continues to hold discussions with the pilots' union regarding potential furloughs as it looks for ways to cost-effectively reduce or eliminate pilot positions.

Chart showing the share price performance of Delta Air Lines, Inc. (DAL)
TradingView.com

From a technical standpoint, the stock remains in a rising wedge pattern that suggests a near-term directional decision. The relative strength index (RSI) moved into overbought territory with a reading of 71.14, but the moving average convergence divergence (MACD) continues to trend higher. These indicators suggest that there could be some consolidation, but the intermediate trend remains bullish at the moment.

Traders should watch for a breakout from the rising wedge pattern to test the 200-day moving average at $37.12 over the coming sessions. A further breakout could lead to a test of upper trendline resistance at around $39.00. If the stock breaks down from the rising wedge, traders could see a move toward the 50-day moving average at $28.39 or prior lows of around $24.00.

The Bottom Line

Delta Air Lines shares moved higher during Tuesday's session after Seaport initiated coverage on the stock with a Buy rating and a $43.00 price target. With the stock quickly approaching a technical decision point, traders should watch for a near-term breakout or breakdown.

The author holds no position in the stock(s) mentioned except through passively managed index funds.

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