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If we've learned anything from the past, when energy costs increase, the airline stocks usually come under selling pressure. Spot crude is now trading around $71 a barrel and is expected to climb in the near term. There are many factors driving the oil price, the least of which is the turmoil in the middle east. Then there's OPEC's production cuts, which are also helping to keep energy prices elevated.
And while Delta Air Lines (NYSE:DAL) has been weak since mid January, it actually owns an oil refinery, which means that it only benefits when oil prices are high. Essentially, Delta has protection against the risk of high "crack spreads," a term used in the oil industry for the differential between the price of crude oil and the petroleum products it makes – think jet fuel.
Delta's stock peaked on January 16, 2018 at $60.79 a barrel. Today, DAL stock hit $52.23 a share, which puts the stock below its important 50-day moving average. That kind of chart formation puts a stock in a weak technical position, near term. Delta's next major support is around $49. And that's where it found defense back in early February. And that's generally when the institutional crowd steps in to defend an equity when retested.
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