TEC
CHNICAL ANALYSIS
Airlin
nes Septtember 3, 2013 TECHNICAALLY, DA
AL IS BESST OF AIRRLINES Wolffe Technical Research is intended to provide an addition al discipline
e alongside the firm’s d
differentiated
d
undamental analysts. T
fund
damental cov
verage. Dellta Air Lines (DAL) is ratted Outperfo
orm by our fu
Today’s note
e
high
hlights the technical team
m’s confirmin
ng bullish vie
ew on DAL.
Tech
hnical Take
eaway: Deltta Air Lines
s (DAL, $19
9.6): Delta has been a
an integral p
part of renew
wed airlines
s
lead
dership, and we believe recent
r
price weakness in the stock sshould be bo
ought.
Best of Airllines: Delta has
h been an integral
i
part of renewed iindustry leaddership
Airlin
nes are em
merging ass long‐term
m leadersh
hip…
B
Bloomberg U.S. Airlines vs. D
DJ Transporrtation Ave
erage Relativve breakout!
D
Delta (DAL)) vs. B
Bloombergg U.S. Airlin
nes
…and Delta
a is leading
g this reverrsal.
Sourcee: Wolfe Technical Research;
R
Bloombergg.
Click fo
or Technica
al Research
h Methodolo
ogy
For iinformation on fundame
ental researc
ch please reffer to recentt notes by ou
ur Airlines an
nalyst, Hunte
er Keay:
Insid
de Airlines: Why
W we think DoJ will lo
ose AMR/LCC (August 2
26, 2013)
DAL
L: We found some intere
esting nuances in DAL's 10-Q (Augu
ust 2, 2013)
DAL
L: Trainer be
ecoming a dis
straction, bu
ut core busin
ness solid (JJuly 24, 2013
3)
Ari H.
H Wald, CFA
A, CMT – Dessk Analyst
(646) 845-0754
AWald@WollfeResearch. com
This reeport is limited solely for the u
use of clients of Wolfe Research
h. Please refer tto the DISCLOSSURE SECTION lo
ocated at the end of this reporrt for An
nalyst Certificatio
ons, Important Disclosures and
d Other Disclosu
ures. WolfeReesearch.com Page 1 o
of 7 TECHNIC
CAL ANALYS
SIS
The W
WR Airlines
s team’s fu
undamental research points to A
ALK, DAL, and UAL as stocks that are well
positioned to outperform th
he S&P 500
0 over the next few ye
ears even iif the AMR//LCC merg
ger falls apa
art
(they think it won’t, Inside Airlines:
A
Why we think
k DoJ will lo
ose AMR/L
LCC, Augusst 26, 2013
3). In today
y’s
nical note, we
w highlight why airlin
nes should remain an industry lea
ader in the
e coming ye
ears and wh
hy
techn
DAL iis best of breed on a te
echnical ba
asis, in our opinion.
Teechnical Ou
utlook for tthe Airlinees Industryy = Bullish Renewed streng
gth for airlin
nes stocks can
c be exh
hibited by th
he industry’’s reversal of a 12-yea
ar downtren
nd
and a confirming reversal of a 10-ye
ear downtre
end relative
e to the Do
ow Jones T
Transportattion Averag
ge
(Exhib
bit 1). We
e believe that
t
this indicates tha
at a new ssecular tren
nd is likelyy emerging
g on both an
a
absolute and relative basis
s. There sh
hould be so
ome fits an
nd starts along the wa
ay, but, in o
our view, th
he
o
for the industtry, as mea
asured by th
ex, is its 200
07
next llong-term objective
he Bloomberg U.S. Airlines Inde
ve current le
evels (top panel).
p
Versus the DJJTA, the ind
dustry still must clear its 2010 an
nd
peak, 62% abov
ghs, but a test
t
of these resistanc
ce points w
would imply 16% and 3
38% of outp
performanc
ce,
2008 relative hig
ectively, from current levels (botto
om panel). Delta (DA
AL) has bee
en an integ
gral part of this renewe
ed
respe
airline
es leadersh
hip, and we believe rec
cent price weakness
w
in
n the stock should be bought (pa
ages 2 & 3)..
Bloom
mberg U.S. Airlines Index (constituent we
eightings): DAL (34%
%), UAL (19%), LUV (19%), AL
LK
(8.3%
%), LCC (5.3
3%), SAVE (4.6%), AL
LGT (3.7%)), JBLU (3.6
6%), SKYW
W (1.4%), H
HA (0.7%)
Exhibit 1. Bloomberg
g U.S. Airlines (Top) & U.S. Airlines
A
vs. DJJ Transportat ion Average (Bottom) (weekly chart, 20000-current)
Airliness Industry is reversin
ng its secullar declinee…
Price objective
Bloombe
erg U.S. Airrlines Indexx 200‐day moviing average
200‐‐day moving avverage …and takking on a leeadership rrole to boo
ot.
U
U.S. Airline
es vs. Dow Jones TTransportaation Averaage Source: W
Wolfe Technical Reseearch; Bloomberg.
WolfeReesearch.com Page 2 o
of 7 TECHNIC
CAL ANALYS
SIS
Delta A
Air Lines (D
DAL)  Ta
akeaway: DAL rema
ains one of
o the stron
ngest stockks in the A
Airlines Industry, and recent pric
ce
we
eakness sh
hould be bo
ought.
 Le
evels to Watch: DAL is testing $19
$ supportt at its 100--day moving
g average a
and May pe
eaks, and we
w
be
elieve this is an attrac
ctive level to buy sharres. There is downsid
de risk to $
$17 if a dee
eper setback
de
evelops.
 Trrend: DAL has been in a very sttrong uptrend since la
ate 2012, an
nd is back tto 2007 ressistance ne
ear
$2
21. It is rea
asonable to see DAL’s
s uptrend moderate
m
at this formerr peak (Exh
hibit 3).
 Indicators: Weekly momentum
m
has
h mainta
ained a “strrong” overb
bought con
ndition throughout 201
13
an
nd has not diverged frrom price. Daily mom
mentum hass setback tto an overssold conditio
on, similar to
Ap
pril. Overso
old in an up
ptrend is an
n attractive setup for n ew longs (E
Exhibit 4).
 Re
elative Stre
ength: We
e are most bullish abo
out DAL’s rrelative tren
nd vs. the B
Bloomberg U.S. Airline
es
Index. We are
a particullarly encou
uraged about the stocck’s breako
out above 2
2010 relativve resistanc
ce
(E
Exhibit 2). In our view, this breako
out indicate
es that DAL
L should rem
main an ind
dustry leade
er.
 Riisk to View
w: $17 sup
pport should
d hold amid
dst our bull ish outlookk for DAL. T
This is the stock’s Jun
ne
20
013 low, Ma
arch 2013 high,
h
and th
he 38.2% retracement
r
t of its gain
ns since No
ovember. A
An inability to
maintain this level of de
emand is the
e risk to our view.
Exhibit 2. Delta Air Liines (DAL) vs. Bloomberg U.S.
U Airlines In
ndex (weekly cchart, 2007-currrent)
DAL vss. Airlines Breakkout! Stick w
with this tren
nd Bestt of Airlinees: Delta ha
as been an
n integral part of ren
p
newed indu
ustry leadeership Source: W
Wolfe Technical Reseearch; Bloomberg.
WolfeReesearch.com Page 3 o
of 7 TECHNIC
CAL ANALYS
SIS
Exhibit 3. Delta Air Liines (DAL) (weeekly chart, 2007-current)
$21..4 A pa
ause to refr
fresh at 20007 resistan
nce 200‐day m
moving averagee
DAL Great exxample of m
maintaining a
a “strongg” overbough
ht condition
RSI Weekly R
Overbought O
Overso
old Exhibit 4. Delta Air Liines (DAL) (daaily chart, 20122-current)
$19 (23.6% of Nov. ‘12 – Au
ug. ’13)
$17.1 (38.2% of Nov. ‘12 – A
Aug. ’13)
Hollding 100‐dayy m.a. at $18.7
DAL ptrend = Oversold in an up
buying opp
portunity
tactical b
100‐day m
moving average
e
Dailly MACD SSimilar setupp as April Source: W
Wolfe Technical Reseearch; Bloomberg. WolfeReesearch.com Page 4 o
of 7 TECHNIC
CAL ANALYS
SIS
WOLFE TECCHNICAL RESEARCCH – OUTTLINE OFF METHO
ODOLOGY
Y
Wolfe
e Technicall Research is intended
d to genera
ate investm
ment ideas, provide ta
actical entryy/exit signals,
and a
act as an additional
a
la
ayer of risk
k managem
ment for ourr clients that are makking fundam
mental-base
ed
investtment decis
sions. The identification of trend, both on a
an absolute basis and relative to the S&P 50
00
Indexx, is the prrimary obje
ective of our
o process
s and an array of in
ndicators a
are used a
as confirmin
ng
evidence.
Objec
ctive
Our o
objective on
n a technic
cal basis is
s twofold, 1)
1 identify a
an above-a
average like
elihood of an emergin
ng
trend at the earliest possib
ble moment and, 2) stick with th
hat trend un
ntil contraryy signals develop. Th
he
follow
wing is a ste
ep-by-step outline
o
of our process..
Step--by-Step Approach
A
dentify trend
d at a long
g-term (3Y
Y-5Y), interrmediate-terrm (9M-18
8M), and near-term (3
3M-6M) tim
me
1. Id
ho
orizon. The
e goal is to invest in the direction of the long
g-term trend
d.
2. Uttilize volum
me, mome
entum, and
d relative strength iindicators to measurre for con
nfirmation or
divvergence. Confirmed trends tend
d to continu
ue and dive
ergent trend
ds tend to re
reverse.
3. Id
dentify and determine
d
whether
w
sup
pport/resisttance shou
uld or should
d not hold, calculate a price targe
et,
an
nd deliver an
a actionablle conclusio
on based on the weigh
ht of the evvidence obta
ained from our analysis.
4. La
ay out a co
ounter scen
nario that would
w
deraill our view. This is crritical towarrds managiing downsid
de
rissk.
Clicck here for a more deta
ailed discus
ssion of our Methodolo
ogy for tech
hnical analyysis at the sstock level.
For in
nformation on fundam
mental rese
earch pleas
se refer to recent note
es by our A
Airlines analyst, Huntter
Keay::
Inside
e Airlines: Why
W we thin
nk DoJ will lose AMR/L
/LCC (Augu
ust 26, 2013
3)
DAL: We found some
s
intere
esting nuan
nces in DAL
L's 10-Q (August 2, 20
013)
coming a distraction,
d
but
b core bu
usiness solid
d (July 24, 2013)
DAL: Trainer bec
WolfeReesearch.com Page 5 o
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CAL ANALYS
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DISCL
LOSURE SE
ECTION
Analys
st Certification:
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nalyst of Wolffe Research, LLC primarily
y responsible for this resea
arch report wh
hose name ap
ppears first on
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of this research report hereby ce
ertifies that (i) the recomme
endations and
d opinions expressed in this research re
eport accurate
ely
reflect the research
h analysts’ personal views about the su
ubject securiti es or issuerss and (ii) no p
part of the ressearch analys
sts’
compe
ensation was, is or will be directly
d
or indirectly related
d to the speciffic recommen
ndations or vie
ews contained in this report.
Importtant Disclosu
ures:
Price C
Chart with Ra
atings and Tarrget Price His
story
Note: O
OP = Outperfform; PP = Pe
eer Perform; UP
U = Underpe
erform
Wolfe Research, LLC
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Research
h Disclosure
es:
Compa
any:
Research
R
Disclosures:
DAL
None
N
s:
Other Disclosures
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L
Fundame
ental Stock Ratings
R
Key::
Outperrform (OP):
Peer P
Perform (PP):
Underp
perform (UP):
The
T
security is projected to outperforrm analyst's industry coverage univerrse
over
o
the next 12 months.
The
T security is
i projected to
o perform ap proximately in line with an
nalyst's industry
coverage
c
univ
verse over the
e next 12 mon
nths.
The
T security is projected to
t underperfo
orm analyst's industry covverage univerrse
over
o
the next 12 months.
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LC uses a relative rating system
s
using terms such as Outperform, Peer Perfform and Und
derperform (see
definitions above). Please
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Research, LLC
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research in its entiretty and not in
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Wolfe Research, LLC
L
Sector Weighting
W
System:
Markett Overweight (MO):
Markett Weight (MW
W):
Markett Underweigh
ht (MU):
Expect
E
the ind
dustry to outp
perform the p
primary marke
et index for th
he region (S&
&P
500
5 in the U.S
S.) by at leastt 10% over th e next 12 mo
onths.
Expect
E
the in
ndustry to pe
erform approxximately in line with the primary markket
index for the region
r
(S&P 500
5 in the U.S
S.) over the next 12 month
hs.
Expect
E
the in
ndustry to un
nderperform tthe primary m
market indexx for the region
(S&P
(
500 in th
he U.S.) by at least 10% o
over the next 12 months.
Wolfe Research, LLC
L
Distributtion of Funda
amental Stoc
ck Ratings (A
As of June 3 0, 2013):
Outperrform:
Peer P
Perform:
Underp
perform:
42%
43%
15%
4%
4 Investmen
nt Banking Clients
0%
0 Investmen
nt Banking Clients
0%
0 Investmen
nt Banking Clients
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