In recent years, Southwest Airlines Co. (NYSE:LUV) has weathered its fair share of challenges. From operational hurdles to strategic decisions, the company has navigated through turbulent times. However, amidst these difficulties, there are indications that Southwest might be on the path to recovery.
One significant event that impacted Southwest’s stock performance in recent months was the announcement of a capacity reduction plan in March 2024. This decision, driven by issues with their aircraft supplier Boeing, caused a notable drop in Southwest’s stock. The airline revised its financial outlook, citing adjustments in key metrics such as Revenue per Available Seat Mile (RASM) and Available Seat Miles (ASM).
Boeing’s ongoing production challenges further compounded Southwest’s predicament. With delays in aircraft deliveries and quality issues plaguing the aviation giant, Southwest had to rethink its operational strategies. The reduction in expected aircraft deliveries directly impacted Southwest’s capacity plans for the year, necessitating adjustments in workforce and financial projections.
Despite these setbacks, Southwest has demonstrated resilience in its operational performance. With consistently high completion factors and strategic adjustments, the airline has managed to uphold its service standards amid adversity. However, the financial implications of these challenges became evident with Southwest posting a larger-than-anticipated loss in the first quarter of 2024.
Looking ahead, there are signs of optimism within Southwest. Bookings for the upcoming quarters are ahead of seasonal norms, and the airline anticipates positive year-over-year trends in key financial metrics. Moreover, Southwest is evaluating changes to its business model and operational practices to adapt to the evolving landscape of the aviation industry.
Against this backdrop of operational difficulties and strategic realignments, Southwest’s resilience and adaptability position it for potential recovery and growth. By examining chart patterns and market trends, we can gain insights into the stock’s performance and assess its prospects for recovery. Let’s delve deeper into the charts to uncover what lies ahead for Southwest Airlines stock in the coming months.
The long-term downtrend might just have ended
On Southwest’s daily charts, we can observe the long-term downtrend that persisted between April 2021 and October 2023, which took the stock from levels close to $60 to below $22. In June last year, it seemed that this downtrend had ended when the stock broke above its long-term bearish trendline. However, that turned out to be a false breakout.
The downtrend finally came to an end in October, when the stock made a low below $22 and then bounced back to $35 levels by March this year. The stock again started falling in March due to Boeing-related concerns, but hasn’t broken below its October 2023 lows and it seems that this is the start of a new bull run.
If the stock doesn’t go below its newly formed bullish trendline, it can continue to move higher. Investors who own the stock can continue to hold it as long as it doesn’t fall below this bullish trendline or starts trading below $22 in the near term. Traders and investors who want to buy the stock can go long at current levels keeping a stop loss below the recent swing low at $25.4. If it continues to March upwards, we can see it reach $38.2 and $48.39 in the coming months where profits could be booked.
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