History Suggests Clear Skies Ahead For This Airline Stock

Short covering could keep the wind at ALK's back, too

The shares of Alaska Air Group, Inc. (NYSE:ALK) are up 3.6% to trade at $63.63 today, bouncing back after logging a stiff October loss. The regional airliner could be due for an even bigger breakout this month, if past is prologue.

On the charts, Alaska Air Group stock gapped lower in early October, eventually turning in a 10.8% loss for the month. Currently, the shares have rallied up to their 80- and 100-day moving averages.

These trendlines can soon be toppled, though, if the equity can ride seasonal tailwinds again this year. Specifically, ALK has been among the best stocks to own in November over the past 10 years, with the shares ending the month higher 90% of the time, and averaging a gain of 7.36%, per data from Schaeffer's Senior Quantitative Analyst Rocky White.

Should ALK break out, a capitulation of bearish bets could keep the wind at the stock's back. Short interest increased by 8% in the most recent reporting period to 10.16 million shares, the most since June 2016. This represents a healthy 8.3% of the security's total available float, and nearly six days of pent-up buying power, at the average pace of trading.

In the options pits, speculators have been upping the bearish ante lately. On the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the stock's 10-day put/call volume ratio of 0.71 is in the 78th percentile of its annual range. This indicates a healthier-than-usual appetite for long puts relative to calls on ALK during the past two weeks.

Echoing this is the stock's Schaeffer's put/call open interest ratio (SOIR) of 1.01, which ranks just 2 percentage point from an annual high. In other words, short-term speculators are more put -heavy than usual on Alaska Air. An unwinding of pessimism in and out the options pits could fuel upside for the regional airliner.