SAVE: Strong Fundamentals, Bullish Technicals 1W (Jun. 19)

2020年6月19日

X Force Global Analysis:


In this analysis, we take a look at Spirit Airlines, a company leading the ultra low-cost carrier business in the US. We explore the company's fundamentals, as well as its technicals to assess its bullish probabilities.

Fundamental Analysis

- Spirit Airlines (SAVE) has shown an extremely steady growth over the past years.
- Their revenue and net profit showed a steady increase throughout time
- However, as with most other airline companies, Spirit Airlines was also heavily hit by the Corona Virus (COVID-19)
- As a result, they have underperformed in terms of quarterly eps, in Q1 2020
- Nonetheless, as the stock market continues to bounce strongly, and the effects of the virus begin to mitigate, we see signs of a continued bullish rally
- With businesses slowly returning back to normal, given that Spirit Airlines' financials remain intact with the current upwards trend, we could anticipate higher returns this year, compared to last year.

Technical Analysis

- Technically, the stock is extremely oversold
- It has broken through the historical support at $33.13, testing new lows
- However, as it dropped so severely, it has dropped in a choppy manner, creating multiple gaps on multiple time frames
- The easiest to spot and refer to are the gaps on the weekly: there are gaps at $10.74, $40.42, and $51.95
- Prices have been trading under the Ichimoku cloud, indicating a bearish trend, for over a year now
- We have two significant resistance lines: the short and long term descending trend line resistances marked in a dotted red line
- The Relative Strength Index (RSI) is forming lower highs, as prices are suppressed by an external factor - the Corona Virus (Covid-19)
- However, the Moving Average Convergence DIvergence (MACD) has formed a golden cross, with immense bullish histograms, demonstrating momentum and strength in the bounce


What We Believe

Spirit Airlines is a rather unpopular stock, with surprisingly strong fundamentals and financials. Technicals demonstrate 3 main areas of resistance: at $33 levels where the short term descending trend line and historical resistance converge. as well as the upper span of the Ichimoku cloud. The second major resistance lies around $40-42, where the previous local high at the 0.618 FIbonacci retracement remains with the price gap. Lastly, there is strong resistance around $51-55 where the 0.786 Fibonacci retracement, and price gap lie, with the long term descending trend line resistance converging. Eyeing these three major areas of resistance will help investors enter positions based on confirmations provided by the trend reacting to these levels. Should we break the final resistance, it's highly probable that SAVE moves to retest all time high levels, and possibly even create new highs.

Trade Safe.