Rectangle Pattern Suggests a Significant Move in American Airlines Stock Soon

American Airlines stock (AAL) has been trending sideways and a rectangle pattern has formed in its chart.  When this pattern is broken, a breakout or breakdown is expected…

American Airlines (AAL) is the world’s largest airline by scheduled revenue passenger miles. The firm’s major hubs are Charlotte, Chicago, Dallas/Fort Worth, Los Angeles, Miami, New York, Philadelphia, Phoenix, and Washington, D.C.

AAL has suffered due to a coronavirus-led drop in demand. This has resulted in a few bad quarters, but as the vaccine rollout continues into the summer, the airline should see a rebound in passenger revenue. Plus, AAL has the youngest fleet among major airlines, which should lower fuel expense and maintenance going forward.

The drop in demand led to cash burn, which has led to a concerning current ratio of 0.7. This means that its current assets are lower than its current liabilities. The company’s profit margin is also negative.

Sales are down year over year, but should rebound in the quarter ending in June. AAL has a very low valuation with a trailing P/E of 2.81 and has shown recent bullish performance, leading to a Momentum Grade of B in our POWR Ratings system.

Take a look at the 1-year chart of AAL below with added notations…

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