American Airlines (NASDAQ: AAL)

American Airlines Group Inc., through its subsidiaries, operates as a network air carrier. It provides scheduled air transportation services for passengers and cargo. As of December 31, 2016, the company operated a mainline fleet of 930 aircraft. It serves 350 destinations in approximately 50 countries, principally from its hubs in Charlotte, Chicago, Dallas/Fort Worth, Los Angeles, Miami, New York, Philadelphia, and Phoenix, as well as in Washington, D.C.

Take a look at the 1-year chart of American (NASDAQ: AAL) with the added notations:

From the end of December through January, AAL had formed a key level of support at $52 (red). The first week of February saw the stock break below that support. Not only did that mean lower prices for AAL, but also the $52 level should most likely act as resistance on future rallies, as it has done a few times already.

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The Tale of the Tape: AAL broke a key level of support at $152. A trader could enter a short position on any rallies up to or near $52 with a stop placed above the level. If the stock were to break back above the $52 level, a long position might be entered instead.

Before making any trading decision, decide which side of the trade you believe gives you the highest probability of success. Do you prefer the short side of the market, long side, or do you want to be in the market at all? If you haven’t thought about it, review the overall indices themselves. For example, take a look at the S&P 500. Is it trending higher or lower? Has it recently broken through a key resistance or support level? Making these decisions ahead of time will help you decide which side of the trade you believe gives you the best opportunities.

No matter what your strategy or when you decide to enter, always remember to use protective stops and you’ll be around for the next trade.  Capital preservation is always key!

Good luck!

Christian Tharp, CMT

@cmtstockcoach