Crude Oil is High So Buy the Airlines

Crude Oil prices have been flirting with breaking higher, and holding over $100 per barrel for some time now. When you mention high Crude Oil to traders one of the first things that pops into their head is to short Airlines. But a look at the AMEX Airline Index says that this is exactly the wrong conclusion. Below is the weekly chart of the Airline Index. Since printing a hammer candlestick to start October the Index soared before making a landing in February. Now as the 20 week Simple Moving Average (SMA) is crossing up through the 50 week SMA the Index is stating to move higher

again out of the basing. It has a Relative Strength Index (RSI) that held bullish during the pullback and a Moving Average Convergence Divergence (MACD) indicator that is avoiding a negative cross. All sign point higher. What is interesting is that the chart for Crude Oil, below, is nearly identical. The hammer in the Airline Index occurred right at the October low for Crude Oil. The mid february top and pullback coincide as well. In fact these two charts are very highly correlated and have been so for the past year! So still want to short the airlines?

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The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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