As Delta Descends, the Charts Show Two Very Different Flight-Path Possibilities

Delta Air Lines DAL is trading sharply lower in the premarket Thursday as earnings in the second quarter and the company's third-quarter outlook disappointed investors and analysts. Let's check out the charts and indicators to see what runway they are touching down on.

In this daily bar chart of DAL, below, I have to imagine that prices are trading in the $42.40 area, which is within striking distance of the rising 200-day moving line. The slope of the shorter 50-day moving average line is negative so we know that the short-term trend is bearish. The On-Balance-Volume (OBV) line shows weakness since early April. The Moving Average Convergence Divergence (MACD) oscillator is in a bearish alignment below the zero line telling me that DAL lacks trend strength.

In this weekly Japanese candlestick chart of DAL, below, I can see some big up and down swings for this stock. Prices were trading lower for two months before this morning's disappointing news. The rising 40-week moving average line intersects around $43 and is likely to be tested or broken today. 

The trading volume has been very light in recent weeks. The weekly OBV line shows weakness the past two months. The trend-following MACD oscillator has crossed to the downside and is correcting.

In this daily Point and Figure chart of DAL, below, I can see that the software was projecting a downside price target in the $44 area ahead of the weakness this morning.

In this weekly Point and Figure chart of DAL, below, I can see the same $44 price target as the daily chart above. Further losses look possible.

Bottom line strategy: Shares of DAL look like they can retest the $42-$40 area in the days ahead. If support develops then we could see prices bounce, otherwise we are looking at a deeper decline in the weeks ahead.

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