American Airlines Stock Hits Turbulence. Here's How to Trade It Now.

American Airlines stock fell almost 10% on Wednesday following a disappointing update. Here's the trade (for both bulls and bears) now.

At the start of the year, airline and travel stocks were trading really well. Many were breaking out, and in the case of airline stocks, American Airlines was leading the way higher.

Then the stock was grounded.

American Airlines stock surged 44% from its Dec. 28 low to its Jan. 18 high. At Thursday’s low, the shares were down almost 28% from that high.

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On Wednesday, the shares slumped about 10%. That came after the airline  (AAL) - Get Free Report issued preliminary first-quarter results that came up short of consensus expectations.

The company is scheduled to report earnings on April 27. For what it’s worth, Delta Air Lines  (DAL) - Get Free Report reported an earnings miss this morning, but its solid outlook helped offset some investor concern.

At last look Delta Air shares were lower by about 0.5% on the session while American Airlines stock is about flat.

Trading American Airlines Stock

Amid the pullback, American Airlines stock found its footing near $13.40 to $13.50. Not only did this area end up acting as support, it also marked the 78.6% retracement of the prior rally and included the March low.

So when the shares decisively broke below this zone yesterday — closing at $13 — the price action made very clear that the bears were in control.

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Given the number of measures in this area that were support, traders now must think of the $13.40 to $13.50 area as potential resistance unless the stock is able to reclaim this zone.

Further, the declining 10-day and 21-day moving averages could act as resistance as well, although they are currently just above this zone right now. 

In the days ahead, they will move lower and if the scenario aligns with the stock’s rally into the $13.50 area, traders may have a high-probability selling opportunity.

Otherwise, the bulls can look for a potential dip down to the $12.25 zone as a buying opportunity. This area was key support in late December and helped spur the upside run we saw in January.

If it fails, American Airlines stock could retest the 2022 low at $11.65. 

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