LUV was posted as a short setup one week ago today with an entry to be triggered on a break below this bearish rising wedge pattern (original chart on top). LUV has since clearly broken below the pattern but still offers an objective entry at current levels at the sole profit target is about 15% below current prices. An objective stop for this trade would be just above the recent highs, around the 14.60 area which would give this trade about a 3:1 R/R if entered here (or better if entered immediately following the breakdown).
As posted last week, the airline sector remains one of my favorite sectors on the short side at this time and there are several individual airline stock short setups & active trades on the site at this time. As far as LUV, the first chart below is a 6-day period chart (each candlestick represents 6-days of trading, which is just one more day than a weekly time frame chart). One could argue either case on the outlook for LUV from a technical perspective. The bullish case would hinge largely on the fact that LUV has just recently taken out an 11+ year downtrend line which of course, on face value, is bullish. The bearish case would focus on the fact that LUV has reached unprecedented overbought readings on what is likely the tail-end of a greatly over-extended run. Any half-decent pullback from current levels will bring prices back below that decade+ primary downtrend line, thereby causing a failed breakout or bull-trap in the stock and likely sending prices considerably lower.
A key level is that purple uptrend line on the 6-day period chart (first chart above) which is also uptrend line that triggered the short entry on the daily frame (second chart above). Any weekly (or 6-day period) close below that uptrend line would be additional confirmation that the current uptrend is in jeopardy and likely send prices back below the long-term uptrend line. While many traders might has established a short position on the break of the daily uptrend line/bearish rising wedge pattern, some traders might prefer to see a close below the weekly uptrend line before entering or adding to a starter position taken when the daily trendline was broken.