Delta Air Lines (DAL) stock is gearing up for its fiscal third-quarter earnings report, which is due out before the open on Thursday, Oct. 9. The shares still sport a 47.2% six-month lead despite a recent pullback from their early September peak, while support at the $56 level is emerging as a floor. What’s more, a long-term historically bullish trendline could help DAL bounce back, should quarterly results impress.
According to Schaeffer’s Senior Quantitative Analyst Rocky White, Delta Air Lines stock is within 3% of its 12-month trendline, after spending at least 80% above it in the past 20 monthly closes. Looking back two decades, 13 similar signals have occurred, after which the equity was higher one month later 69% of the time with an average 5.6% gain. Longer-term returns are even better, with DAL up 89% over the next three months to average an 11.5% pop, which from its current perch would place it back above $63.
While the security has settled lower after five of its last eight earnings reports, it secured sizable gains after the past three, including a 23.4% next-day pop in April. The security has averaged a 7.9% move, regardless of direction, over the last two years, with options traders expecting a comparable move this time around.
While calls still outpace puts, short -term options traders have been more bearish than usual, and an unwinding of some of this pessimism could give the stock a boost. This is per the security’s Schaeffer’s put/call open interest ratio (SOIR) that sits in the 71st percentile of readings from the last 12 months.
The equity sports attractively priced premiums, per its Schaeffer’s Volatility Index (SVI) of 57% that sits in the low 28th percentile of its annual range, meaning options traders are pricing in low volatility expectations. It’s also worth noting that DAL’s Schaeffer’s Volatility Scorecard (SVS) of 88 out of 100 suggests it has tended to outperform volatility estimates over the past year.