One is bouncing from a key trendline, while the other has been one of October's best
The S&P 500 Index (SPX) is set to end September with a gain. While United Continental Holdings Inc (NASDAQ:UAL) has risen alongside the SPX, fellow airline stock Delta Air Lines, Inc. (NYSE:DAL) is headed for a monthly loss. Looking ahead, both UAL and DAL could be headed for short-term gains, if history is any guide.
United Continental Stock Overdue for Upgrades
United Continental shares have surged 32% year-to-date, and are pacing toward a 1.6% September gain -- up 1% at $88.83. After topping out at a record high of $91.39 on Sept. 17, UAL stock pulled back to its rising 40-day moving average, a move that's had bullish implications in the past.
According to data from Schaeffer's Senior Quantitative Analyst Rocky White, there have been seven other times in the past three years UAL has come within one standard deviation of its 40-day trendline after a lengthy stretch above it. The equity went on to average a one-month gain of 8.9%, with 86% of those returns positive.
A round of well-deserved bullish brokerage notes could help keep the wind at UAL stock's back, too. Of the 16 brokerages covering United Continental, nine maintain a lukewarm "hold" rating. Plus, the average 12-month price target of $94.23 is a slim 6% premium to current trading levels.
History Could Spook Delta Air Lines Shorts
Delta Air Lines stock is trading up 0.8% at $57.58, after the company lifted a U.S. groundstop after technical issues disrupted flights on Tuesday. The shares topped out at an eight-month high of $60.23 last Friday, before pulling back to its year-to-date breakeven level. DAL is still pacing toward a September loss of 1.7%, but has been one of the best stocks to own in October.
Looking back over the past 10 years, Delta Air Lines has finished the month of October in positive territory nine times, per data from White. What's more, the airline stock has averaged a monthly gain of 11.14% -- the most of any SPX stock on the list. Based on its current perch, another move of this magnitude would put DAL near $64 -- above its Jan. 16 record high of $60.79.
A sharp move higher could shake some of the weaker bearish hands loose. Short interest surged 18.3% in the two most recent reporting periods to 21.62 million shares. It would take shorts four days to cover their pessimistic positions, at DAL's average daily pace of trading -- signaling sideline cash available to fuel upside.