Southwest Airlines (LUV)

Company

LUV 1-year chart LUV 1-year chart

"Southwest Airlines Co. is a major domestic airline that provides primarily shorthaul, high-frequency, point-to-point, low-fare service. Southwest was incorporated in Texas and commenced Customer Service on June 18, 1971 with three Boeing 737 aircraft serving three Texas cities - Dallas, Houston, and San Antonio. Today Southwest operates over 400 Boeing 737 aircraft in 63 cities. Southwest has the lowest operating cost structure in the domestic airline industry and consistently offers the lowest and simplest fares. Southwest also has one of the best overall Customer Service records. LUV is our stock exchange symbol, selected to represent our home at Dallas Love Field, as well as the theme of our Employee and Customer relationships." (company website)

LUV 6-month chart
LUV 6-month chart

Buy

Southwest has been on a steady downtrend for most of the last 12 months, but it appears to have bottomed at the beginning of June. Yesterday's market sell-off provided a correction for the rapidly rising stock price, especially after a nice positive earnings surprise earlier this month.

  • Price momentum (PPO) — sharply increasing
  • Relative strength (RSI) — driven back to neutral
  • Trend (ADX) — very strong, with buying pressure (+DI) and selling pressure (-DI) about equal
  • Volume — increasing

Based on technical analysis, MarketEdge calls LUV a "strong buy" in a "weak upward trend."

Sell

loss Bottom line
-19%

Sometimes you win, sometimes you lose, and I lost big on Southwest. Although oil prices hit new highs this year, I thought Southwest's long history of profitability might overcome general pessimism about airline stocks. It just didn't work out that way. Even beating Expectations by a penny with 3rd quarter earnings couldn't stop the slide. What looked like a turn-around in November also fell apart. With the end of the year coming up, I decided to sell and take the loss. It doesn't help my bottom line, but the capital loss will help when it's time to calculate taxes. Cold comfort, that!