History suggests both stocks could revisit record highs next week
Earlier this week, Goldman Sachs chimed in on airline stocks and the its top picks throughout the sector. Two names on the list were United Continental Holdings Inc (NASDAQ:UAL) and Delta Air Lines, Inc. (NYSE:DAL), which are also flashing bullish signals ahead of Thanksgiving week.
United Continental Has Plenty of Room on the Runway
According to Schaeffer's Senior Quantitative Analyst Rocky White, UAL has been one of the best S&P 500 Index (SPX) stocks to own during Thanksgiving week, looking back 10 years. More specifically, the airliner has been higher the week of Thanksgiving 80% of the time in the past decade, with the equity averaging a gain of 6.36%, second highest of all the names on the list.
A move of similar magnitude could put UAL above its Nov. 9 record high of $93.60, based on its current perch -- down 1% today to trade at $91.66, despite an earlier price-target hike to $102 from $95 at Morgan Stanley. Nevertheless, the shares boast a 37% lead in 2018, with October's sharp decline contained by their 100-day moving average.
In the options pits, an unwinding of pessimism could keep the wind at the stock's back. Data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) shows UAL with a 10-day put/call volume ratio of 1.09. This ratio is in the 96th percentile of its annual range, suggesting option buyers are picking up bearish bets over bullish at a much faster pace than usual.
Those wanting to bet on UAL's short-term trajectory may want to consider doing so with options. The stock's Schaeffer's Volatility Index (SVI) of 27% sits in just the 18th annual percentile, revealing low volatility expectations are being priced into near-term contracts.
DAL Could Revisit Record Highs Next Week
Delta Air Lines stock also tends to outperform during Thanksgiving week. According to White, DAL has been higher the week of Thanksgiving 80% of the time in the past decade, with the equity averaging a gain of 4.62%. At last check, Delta stock was down 0.8% to trade at $56.40, but a move of similar proportion higher would have the equity closing in on its Jan. 16 record high of $60.79.
