Blow Off Top in United Opens Up Tactical Short Opportunities

$UAL

For some unbeknownst reason, I enjoy and have had success trading the airlines. This isn’t for most. Perhaps that’s why.

UAL 0.00%↑ has been insane since August, up nearly 175%. It printed yesterday what might end up proving to be a blow off top candle, reaching another 52 week high, before ending the session lower. Zooming out, we can see that this occurred at a familiar price level for the stock, a November 2018 high which preceded sideways action until the Covid related sell-off. RSI has been persistently high, demonstrating strong momentum.

But it might be time for a cool off. That can come in the form of price and/or time. My short term bets are that price appreciation is taking at least a break in the short term, and am employing options strategies to represent that view. As for an outright short of the stock, I would need to see a break below the 5 day, an occurrence that’s been bought up during this move higher. So I’d likely be looking for quick trades below the 5 with stops at the 5 until (and if) it moves demonstrably lower.