Delta Stock: About to Take Off or Emergency Landing?

-- Despite rising fuel costs, Delta Air Lines looks for $1.5 billion in free cash flow and a return to pre-Covid revenue trends. --

By Bret Kenwell, TheStreet.com

Considered by many to be the top airline, Delta Air Lines (DAL) just can't catch a break.

Investors were looking for a potentially significant rotation to take place over last week's high. Instead what they're getting is a 5.5% selloff on Wednesday.

Shares were higher by more than 3% in pre-market trading on news of increasing revenue, capacity and free cash flow.

As reported earlier by TheStreet, Delta's "June quarter revenues should return to pre-pandemic levels with free cash flow in the region of $1.5 billion, even as it cautioned on higher fuel costs."

While the stock initially spiked higher on the report, perhaps concerns of rising fuel cost are weighing on it during the regular-hours session. Of course, it doesn't help that the broader market is under pressure as well.

Fresh off a multi-week high, let's look at the charts for Delta stock.

Trading Delta Stock

Weekly chart of Delta stock

Chart courtesy of TrendSpider.com

If this chart said one thing to me, it would be this: "cautiously optimistic."

That statement was true before Wednesday's 5.5% tumble and it's even more true now. Well, at least the "cautiously" part.

Looking at the weekly chart above, investors can see that Delta stock tried to go weekly-up by clearing last week's high at $42.23. However, buyers couldn't keep up the momentum and shares reversed lower.

That said, not all hope is lost.

Delta stock is an important area, as it tries to hold the 10-week, 21-week and 50-week moving averages. The 10-day, 21-day, 50-day and 200-day moving averages are also in this zone around $40.

Put another way, it's congested. On the plus side, Delta stock has done a great job breaking out of its downtrend channel, then finding prior downtrend resistance to be a rough area of support.

If it breaks below $39 -- and thus all the moving averages listed above -- the hope is that it will find this area to be support again.

On the upside, the $42.25 area remains of interest. If Delta can clear this level later this week (or on a two-times weekly-up rotation next week), we could see a quick push to $45.

There it finds the 200-week moving average and the 61.8% retracement of the Covid-19 decline. It's also been a major resistance zone since October.

Above that opens the door to $50, then the post-Covid high at $52.28. Lastly, the gap-fill is up at $56.87.

From TheStreet.com