United Airlines reports second-quarter results after the close. The estimate is adjusted earnings per share of $1.89 on revenue of $17.68 billion. UBS expects the report to land near the high end of guidance. Third-quarter EPS is seen at $3 to $4, though a higher fuel-cost assumption should push that range lower. The stock rose 7% this month but is down close to 12% in July.
How UAL trades against its peers
Over the past year, United has been strong. It is outpacing the industrial sector, of which it is a member. A closer match is JETS, the ETF that tracks airlines, and UAL follows it tightly. United stands out among domestic airlines as the only one that owns its own refinery, so it may be less exposed to the wild swings in crude oil tied to the Strait of Hormuz situation. Among the major U.S. airlines, United sits second in the pack.
The chart
Recent price action has formed a wide upward channel, drawn by connecting the low points. There was a small breakdown yesterday. Highs at 138.77 built a repeated ceiling during a series of spikes a couple of weeks back. From that ceiling you can draw a steep downward trend line, still in play now.
Horizontal levels to watch: recent highs near 130; old highs and later lows near 116; and another zone around 101 to 102.
The moving averages cluster together. The 5-day EMA, the 21-day EMA, and the weekly and monthly EMAs all meet around 124, close to the trend line. A breakout above that point could trigger a cascade of orders and explosive upside price action. That is a possibility to watch, not a prediction. The 63-day EMA, which covers one quarter, sat at 113.42 at yesterday's close.
The RSI is trending lower, below the 50 midline, and its green trend line has broken. This is common heading into earnings, so it carries little weight this close to results.
Volume profile shows trading at the elevated 133 to 138 zone. Activity picks up again between about 112 and 115, with heavier activity around 105.
A bullish options trade
Looking out to November, the expected move range is 128 days out at plus or minus 25.5%, pointing toward possible new highs. The case rests on strong travel demand and, hopefully, some improvement in the U.S.-Iran situation.
The trade is a November 20 call vertical, buying the 130 call and selling the 150 call, for a $5.50 debit. Max loss is the $5.50 paid. Max profit is $14.50, giving roughly one-to-three risk to reward, a common setup. Break-even is 135.50, about 12% above current price. The expected move reaches well beyond that break-even, so hitting it is within reach, though not guaranteed.
The short 150 strike sits near the top edge of the expected move. Selling it lowers the cost of the trade and caps the profit there. That upper edge marks where the market would look for a slowdown in the name and becomes the max-profit area. Earnings for these airline names are coming up. In the premarket, United traded slightly higher.
