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Sell Into Strength as American Airlines Stock Goes Parabolic

Wait For Another Pullback Before Buying American Airlines (AAL) Stock

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AAL)? In the midst of the novel coronavirus pandemic, AAL stock cratered from around $30 per share to the single digits. But, as investors bet on a recovery, shares temporarily went parabolic, before pulling back in recent days.” data-reactid=”25″>Are things looking up for American Airlines (NASDAQ:AAL)? In the midst of the novel coronavirus pandemic, AAL stock cratered from around $30 per share to the single digits. But, as investors bet on a recovery, shares temporarily went parabolic, before pulling back in recent days.

boosting its travel schedule, the company could be making a swifter-than-expected recovery. But, keep in mind the many fleas on this legacy carrier. Even before the pandemic affected air travel.

InvestorPlace – Stock Market News, Stock Advice & Trading Tips” data-reactid=”27″>InvestorPlace – Stock Market News, Stock Advice & Trading Tips

heavy debt load and other operating issues.” data-reactid=”28″>As I previously discussed, American Airlines already had a heavy debt load and other operating issues.

$5.8 billion in payroll support from the $2 trillion CARES Act stimulus package, they could burn through billions more, even as they increase system-wide capacity back to 40% of prior levels.

could be years before airline stocks like American start rebounding again. With this in mind, this recent enthusiasm may have been too much, too soon.” data-reactid=”30″>The worst of the coronavirus in America may already be over. But, it could be years before airline stocks like American start rebounding again. With this in mind, this recent enthusiasm may have been too much, too soon.

In short, good reason to take the money and run in case shares continue to fall back. And avoid it completely if you haven’t yet entered a position.

Slow Recovery Means More Bad News for AAL Stock

“return to normal.” But, don’t take that to mean smooth sailing ahead for the U.S. economy. The damage caused by the pandemic and its associated shutdowns could linger on throughout the year. And that’s especially the case for the airline industry.

reiterated his equivalent to a “sell” rating. His rationale? The analyst thinks upcoming earnings projections are too optimistic, given how much of the airline’s revenue comes from international flights.

doesn’t look too pretty. Social distancing and safety efforts are going to make air travel unattractive for quite some time.” data-reactid=”35″>Also, don’t expect travelers to return to the skies right away. As our own Louis Navellier recently pointed out, the airline industry’s “new normal” doesn’t look too pretty. Social distancing and safety efforts are going to make air travel unattractive for quite some time.

EADSY) CEO Guillaume Faury previously said it could be “three to five years” before the industry fully recovers. With a long road to recovery, it looks even less appealing to buy American stock, as shares go parabolic.” data-reactid=”36″>This may explain why industry leaders like Airbus (OTCMKTS:EADSY) CEO Guillaume Faury previously said it could be “three to five years” before the industry fully recovers. With a long road to recovery, it looks even less appealing to buy American stock, as shares go parabolic.

Were Recent Bankruptcy Fears an Overreaction?

BA) CEO Dave Calhoun predicted an airline bankruptcy in 2020. And, with this carrier having some of the weakest fundamentals out there, it seemed like the one most likely to file for Chapter 11.” data-reactid=”38″>Before shares went parabolic earlier this month, many saw American as headed towards bankruptcy. A few weeks back, Boeing (NYSE:BA) CEO Dave Calhoun predicted an airline bankruptcy in 2020. And, with this carrier having some of the weakest fundamentals out there, it seemed like the one most likely to file for Chapter 11.

survives coronavirus. Mainly because Washington won’t want to see an airline file for Chapter 11.” data-reactid=”39″>Yet, others saw bankruptcy concerns as overblown. As InvestorPlace’s Tom Taulli wrote in April, chances are American Airlines survives coronavirus. Mainly because Washington won’t want to see an airline file for Chapter 11.

we’re all going to be fine.” But, considering Parker said a few years back that the airline would never again go in the red, I could see why some doubted his optimistic outlook.

remains cloudy.

Sell Into Strength With AAL Stock

heavy amount of short interest.

What’s next for this stock? This “too hot to touch” airline play could pull back further from here. First, as the shorts exit their positions, demand for shares could taper off. Then, if actual results fall well short of today’s bullish forecast, investors buying today out of FOMO could bail as well.

Bottom line: if you own AAL stock now, sell while shares remain in the double-digits. Otherwise, steer clear for now.

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Sell Into Strength as American Airlines Stock Goes Parabolic appeared first on InvestorPlace.” data-reactid=”57″>The post Sell Into Strength as American Airlines Stock Goes Parabolic appeared first on InvestorPlace.

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