New Resistance Could Keep Delta Air Lines Stock Grounded

The struggling airliner is ripe for downgrades

Delta Air Lines, Inc. (NYSE:DAL) has sat out the post-Christmas broad-market rally, with its 20-day moving average serving as a stiff ceiling in recent weeks. Plus, the shares recently formed a bearish flag pattern, suggesting more downside could be in store.

There have been two downgrades to DAL already in January, but there's still ample room for more. Of the 13 brokerages covering the travel stock, 11 rate it a "buy" or better. There is also room for short sellers to climb aboard, as only a slim 2.8% of the security's float is currently sold short. A round of bearish brokerage notes and/or short selling could create headwinds for DAL.

DAL short-term options are attractively priced, too, from a volatility perspective. The stock's 30-day at-the-money implied volatility of 28% looks favorable relative to its one-month historical volatility of 44.8%. Plus, the stock's Schaeffer's Volatility Scorecard (SVS) sits at 77 out of a possible 100, meaning DAL has handily exceeded options traders' volatility expectations in the past year -- a boon for would-be premium buyers.

Subscribers to Schaeffer's Weekend Trader options recommendation service received this DAL commentary on Sunday night, along with a detailed options trade recommendation -- including complete entry and exit parameters. Learn more about why Weekend Trader is one of our most popular options trading services.