Is The ETF, Jets About To Sour
About two months ago, Warren Buffett through Berkshire bought an additional 976,507 shares in Delta at an average per-share price of $46.40. At the time, Transportation Security Administration agents were screening about 150,000 people each weekday down nearly 93% from just more than 2 million on the same weekday a year ago. Last month, Warren Buffett’s Berkshire Hathaway disclosed that it sold large blocks of stock in Delta Air Lines and Southwest Airlines.
During Berkshire’s annual shareholders’ meeting, Warren Buffett says his company the world has changed because of the COVID-19 and that he had been wrong to invest in the airline industry. As a result, his company sold its stake in American airline companies which consisted: 11% stake in Delta Air Lines, 10% of American Airlines, 10% of Southwest Airlines, and 9% of United Airlines.
This past weekend, Transportation Security Administration (TSA) announced the number of travelers passing through checkpoints north of 250,000 for Saturday and Sunday vs more than triple the number from mid-April.
Michael Brush, a financial writer said that Buffett made a mistake when he sold his airline shares because airline executives were confident in the industry’s recovery prospects and were backing up that confidence by buying companies shares.
Government to the rescue: Politicians see the airline sector as a cornerstone of U.S. economic security. Moreover, airlines and related businesses employ a lot of people. So the federal government readily approved $50 billion in support.
Travel is coming back: The number of airline passengers screened per day has risen to around 200,000 from lows of 87,000 in mid-April. This offers “flickers of hope” for the group, says Raymond James airline analyst Savanthi Syth. While still low, travel statistics are heading in the right direction, Syth says.
- Airline stocks did well after the last three financial crises: In the six months after the 9/11 terrorist attacks, the 2003 SARS outbreak, and the 2008-09 financial crisis, airline stocks rose 80%-120%, Holmes points out. Insiders buying now are hoping the past will repeat.
The ETF, JETS invests in companies within the airline industry, which spans passenger airlines, manufacturers, airports and terminal services. Small-, mid- and large-cap companies are included from both the US and internationally. The fund puts about 70% of its weight in US large-cap passenger airlines. Top holdings include:
On the monthly chart, price has dropped about 75% and in the process took out the previous low in Aug 2015. But, in the past couple of months, we are starting to see the buyers step in based on the long tail wicks.
Based on the weekly chart, not only did price formed a double bottom, but price action formed negative divergence. A double bottom reversal pattern is where price stops going lower due to buyers stepping and finally reverses price when additional buyers step in to overcome all the sellers. Negative divergence in a downtrend occurs when the price action makes lower lows, but an oscillating indictor such as the RSI or MACD is making higher highs.
Based on the daily chart, price formed a daily demand at $13.75. Ideally, I would like to see price take out that pivot high, pull back for a long entry to the daily supply at $22.
This post is my personal opinion. I’m not a financial advisor, this isn't financial advise. Do your own research before making investment decisions.
