Part 4

In order to help our followers maximize their profitability, we have decided to analyze the performance of some of the biggest companies within the two ETFs (XLI & XLF).

Delta Airlines Co. (DAL)

Company Background

Our first stock pick from the XLI for the month of October is Delta Airlines. The company plays an important role within the XLI and has been a very attractive stock lately due to the coronavirus’ correction on the market. Delta Airlines is one of the biggest airline companies in the US and operates over 5,400 flights daily and serves around 330 destinations 52 countries on 6 continents. Delta was one of the biggest losers during the latest sell-off. The main reason for that is logical – the airports were blocked and flights have been cancelled all around the world. Therefore, we have seen a massive selling activity among investors in the mean time that led to a huge depreciation on the price, sending it from $60 in February to the lows at $20 in March (67% correction). However, ever since then the stock has been on the rise. It bottomed out from the $20 lows to reach the $37 a few months later. We have then seen some ups and downs on the price, which is logical taking into account the tough times the company has gone through during the coronavirus pandemic. Yet, we should always consider the fact that Delta Airlines is one of the leading US airline companies and the correction that has occurred on the price is giving an amazing opportunity to benefit from – an opportunity we don’t see very often on the market. Currently, the stock is trading at just above $32 and it is still very far from the $62 highs it reached in January just before the coronavirus pandemic started. In other words, the stock is still trading at almost 50% discount from the top and we remain positive for the future direction of the price. We believe in the great philosophy of buying low and selling high and following the smart money as intelligent investors. Therefore, buying the leading airline company at such a huge discount looks very attractive to us. We have been looking closely at the 3rd quarter earnings report that came out on the 13th of October. The expectations were for an EPS of $-3.1 because of the slowdown in the business of the company during the pandemic. The company lost a bit more ($3.3) per share in the past 3 months of this year, confirming the expectations for a bad quarter, caused by the coronavirus and the economic slowdown that followed. Anyway, the price has been in such a massive downtrend ever since February that the stock didn’t really move much after the report as traders and investors had expected such an outcome.

As we have mentioned above, it is clear that it would take longer for the company to recover. However, the massive correction that still gives us a chance to buy the stock at a 50% discount and make high profits in the longer run.

Chart: Delta Airlines

We will start buying DAL stock at the $31 just above the first key support level at $30.80-$31. In case the price drops further we would be adding more to our buy positions at the next support at $29. Our first take profit target will be set at $35, followed by the next target at $40-$42 where we would be fully cashing in our profits.

American Express Co. (AXP)

Our second stock-pick from the XLF would be American Express (AXP). The company plays a key role for the overall performance of the ETF with its current 2.43% weight. American Express is a diversified financial services company that offers charge and credit card payment products, as well as travel-related services worldwide. In fact, the company has long ago become a global leader in the sector it operates. We have been analyzing AXP’s performance for a long time now. We must say the company’s financial performance for the past 5 years has been extremely strong. It has kept on growing its revenues and profits and making more money for its shareholders. We have actually been waiting for a long time to see such a great correction to the downside, which was now caused by the coronavirus pandemic. Due to the massive sell-off all across the board back in February, AXP dropped from $138 to the lows at $67 in only 4 weeks. Ever since then though, the stock has been following the overall bullish sentiment on the market and the stock has been on the rise. It has risen towards the current levels at $106 already and it is still trading at a very decent discount from the top (23%). The company is expected to report its 3rd quarter earnings result on the 23rd of October and the expectations are for $1.38 earnings per share. In case it delivers a better result than that we believe traders would rush into buying the stock immediately and take advantage of the huge upside potential that it has to offer. From a technical standpoint, the price broke the key resistance level at $106 on the 9th of October and that was an indication that traders are still interested in buying the stock and pushing it higher. In other words, they are positioning themselves ahead of the upcoming earnings report later in the month and a positive figure would easily boost the stock further in the next few weeks.

Chart: American Express Co.

We will start buying AXP actively at around $106.30, just above the key support (broken resistance) at $106. We would be interested in adding more to our buy position should the price drop further and test the next strong support mark at $98 where we would be buying more and getting a better average price ahead of the earnings season. Our initial profit taking area would be set at $115, followed by the next target at $125-$130 where we would be fully closing our positions and collecting profits.


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