Spirit Airlines, Inc. provides low-fare airline services. As of June 30, 2015, it operated approximately 360 daily flights to 57 destinations in the United States, Caribbean, and Latin America. As of December 31, 2014, the company had a fleet of 65 Airbus single-aisle aircraft comprising 29 A319s, 34 A320s, and 2 A321s.
Take a look at the 1-year chart of Spirit (NASDAQ: SAVE) below with my added notations:
SAVE has formed a key price level at $60 (red) over the last two months. In addition, the stock created a down trending resistance starting from the middle of May (green). These two lines combined had SAVE stuck trading within a common chart pattern known as a descending triangle. At some point, the stock had to break support or break its string of lower highs, and last week the stock broke support.
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The Tale of the Tape: SAVE broke out of a descending triangle pattern. A short trade could be made on a rally up to $60 with a stop placed above that level. A break back through $60 would set up a potential long trade, and another long could be made on a break through the downtrending resistance.
Before making any trading decision, decide which side of the trade you believe gives you the highest probability of success. Do you prefer the short side of the market, long side, or do you want to be in the market at all? If you haven’t thought about it, review the overall indices themselves. For example, take a look at the S&P 500. Is it trending higher or lower? Has it recently broken through a key resistance or support level? Making these decisions ahead of time will help you decide which side of the trade you believe gives you the best opportunities.
No matter what your strategy or when you decide to enter, always remember to use protective stops and you’ll be around for the next trade. Capital preservation is always key!
Christian Tharp, CMT
Follow me on Twitter: @cmtstockcoach