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American Airlines (AAL) Stock: Fuel Cost Squeezed Q3 Earnings

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American Airlines (AAL) stock price witnessed a strong surge during the start of May and saw a rise of roughly 50%. The stock price initiated a bullish rally from the low of $12.70 and formed an annual high of $19.08. However, the bullish move was halted as soon as the price reached near $19 and faced strong rejection. 

After the rejection, AAL stock price entered into a downtrend, forming lower lows. Recently, American Airlines stock price formed a support at $13.95. The last candle was successful in breaking and closing below $13.95.

American Airlines (AAL) Stock: Fuel Cost Squeezed Q3 Earnings
Source: AAL Stock Price By TradingView.

The stock price is headed toward the support level from where the bullish rally started. If the next candle can break the low of the previous candle, the AAL stock price might melt down to $12.70. On the other hand, if bulls can form a support, the stock price may witness a short-term pullback and retest $13.95. 

Why is American Airlines Stock Falling?

Oil prices have been surging in recent weeks and crude futures reached their highest point since last November due to the extension of voluntary supply cuts by OPEC+ members Russia and Saudi Arabia. 

OPEC+ is now forecasting tightest oil market supply in 10 years. Rising oil prices are already having a significant effect on the airline industry, which is one of the largest consumers of fuel. 

In July, the antitrust regulators forced the breakup of American Airlines’ partnership with JetBlue Airways and now energy costs are rising. North American fuel prices are up by more than 4% in the past months. 

American Airlines does not hedge its fuel expenses which is a strategy used by the other carriers to soften the blow of unusually high oil prices in the recent past. 

There has been a drastic cut in quarter 3 earning guidance of American Airlines. The new earning guidance ranges between 20 and 30 cents, down from the previous guidance of 85 to 95 cents.

Will AAL Stock Fall to $12.70? 

American Airlines (AAL) Stock: Fuel Cost Squeezed Q3 Earnings
Source: AAL Stock Price By TradingView.

The stock price has dropped below 20, 50, 100, and 200-day exponential moving averages, suggesting bearish momentum. Chaikin money flow score has been trading below the 0 mark since 31 August and currently stands at -0.29, implying strong weakness in the market. 

The relative strength index has melted below the 30 mark and has been hovering in the oversold zone since 5 September, indicating a chance of short-term pullback. However, AAL stock price has not shown signs of pullback in the past few days. 

Conclusion

American Airlines has a lot of issues to juggle right now. Investors are also concluding that there is a lot that could go wrong with American Airlines and some of these headwinds need to be cleared for the stock to regain altitude.

Technical Levels

Major support: $12.70 and $11

Major resistance: $15 and $16.20

Disclaimer

The views and opinions stated by the author, or any people named in this article, are for informational purposes only. They do not establish financial, investment, or other advice. Investing in or trading crypto assets comes with a risk of financial loss.

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