Southwest Airlines Co. engages in the management of a passenger airline. It offers ancillary services such as earlybird check-in, upgraded boarding, and transportation of pets and unaccompanied minors.
Take a look at the 1-year chart of Southwest (NYSE: LUV) with the added notations:
LUV has formed an important level of support at $30 (green) during the past few weeks. If the stock comes back down to that level again, traders might be able to expect some sort of a bounce. However, if the $30 support level were to break, lower prices should follow for LUV.
The Tale of the Tape: LUV has key support at $30. A trader could enter a long position at or around $30 with a stop placed under the level. If the stock were to break below the support, a short position could be entered instead.
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