AMR

[David Randolph]

Another day, another white candle for AMR.

This news came out just before the close (didn't have any impact on the share price):

Allied Pilots Association Authorizes Immediate Contractual Changes Allowing American Airlines to Operate DFW-Beijing Flights

It's a small step, but one in the right direction, so that AMR fully capitalizes on globalization trend we've been talking about on this thread.

AMR is a long term holding of the 3 Stocks on Fire Portfolio.

[David Randolph]

There was some natural profit taking on AMR yesterday. There's a gap opened between $30.87 and $31.2. I don't know if it will close this gap or not, I'm not trading sardines here.

Over the long term these things matter:



Compare AMR's growth rate with its industry and sector.

Now check this:



Analysts, on average, are boosting their estimates for AMR. Now they expect $4.44 earnings per share in 2007. So, the current forward multiple is $32.32/$4.44 = 7.3. This is too cheap. It should at least double, considering the growth rate.

AMR is a long term holding of the 3 Stocks on Fire Portfolio. I'll probably add at least one more airline to the portfolio.

[David Randolph]

There were some news and articles on AMR and airlines in general (the sector is in focus now):
- American Airlines Introduces International Self-Service Check In
- Sector Snap: Airline Shares Mixed
- Airline Stocks: Continental, American move higher amid broader decline

This self service check in is a good way to cut labor costs.

Technically AMR had a slower volume day (volume has been staggering lately) and is in consolidation mode after last week's strong rally. I'll continue holding AMR.

[David Randolph]

AMR uses its press releases to advertise its services, I think it is a good use for them:

- The Holidays Are Upon Us, But There's Still Time for a Relaxing Getaway With American Airlines Vacations 'Last Call for 2006'
- Skip the Crowds and Multiply Your Miles on Purchases This Holiday Season
- Thanksgiving weekend travel fares rise with number of passengers

There was also this news: U.S. Airlines Employ Fewer Workers

And this article from TheStreet.com: Highfliers

Get this highlight:

The ATA said airlines are expecting a 3% increase from 2005 in passengers over the holiday period.
The price travelers are paying is also going up.
The average fare for a domestic round trip traveling the Wednesday before Thanksgiving is $355, a rise of 6% from last year, according to data prepared by Sabre Airline Solutions on Oct. 31. For travel on Sunday, the average round trip fare is $389, a rise of 9%.

I call this pricing power.

The airline sector continues to be hot (for a good reason), and the only question is: «David, what are you doing with just one airline on the 3 Stocks Portfolio?»

And the answer is: «I'm going to recommend another one tomorrow, don't worry».

[David Randolph]

AMR left a doji candlestick on the chart (a doji occurs when the close equals the open), which means traders were undecided after the open. Often indecision precludes a change in short term trend.

But as said before, I would never be able to catch a meaningfull move on a stock if I gave much credit to the candlesticks theory. It's good for day trading, but not for position trading, much less for long term investing as I'm doing on AMR.

Well, it was a 2.2% advance day, left no gap on the chart, nice

[David Randolph]

There were several news items on Friday for AMR and airlines in general:

AMR Announces Results of Cash Tender Offers for Selected Debt Securities

The company is buying back notes from bondholders so they can save on interest expenses.

Sector Snap: Airline Stocks Slip

This article was written just after the open, later airlines rebounded and finished with a gain of 0.29%.

Technically there was nothing new on AMR, I'll keep on holding the stock.

[David Randolph]

Were you scared by today's sharp drop in airlines? Well, of course I wasn't  , but not scared either. If you look at many, many charts of stocks that rose a lot (I'm talking about $30 or $40 that go to $100 plus here), you see that they never go up in a straight line.

These corrections are part of the game, and to play it well we need to understand and accept these declines as "normal market behaviour". If we don't we're condemned to be short term traders, with a lot of stress and probably not a whole lot of profits to show after 5 or 10 years trading.

Anyway, as happened with CHINA, AMR's 5.57% decline today didn't change the bullish technical picture. The stock may come down further to touch TL2 at $30.82 or close the gap at $30.87, it doesn't matter, not in my view.

What matters is: the reasoning behind this trade is still valid or not? I think it is, both in fundamental and technical terms, so I'll keep on holding AMR.

[David Randolph]

AMR almost closed the gap (the gap closes at $30.87, low of the day was $31) and almost touched TL2 ascending support. Perhaps the downside isn't over yet, I don't know.

I don't have a problem with this correction, as I firmly believe, giving the technicals and fundamentals of this stock, it will close 2006 above $35.

[David Randolph]

AMR wasn't ready for a rally yet. Needs to consolidate recent gains for some more time. TL2 support is coming up at $31.29 today.

I'll keep on holding AMR.

[David Randolph]

AMR touched the ascending TL2 on the chart and it seems ready to push higher again. As always, some press releases:

American Airlines Celebrates 25 Years of Service to Cancun
American Airlines Announces New Option to Pre-Order Meal for Flights Between the United States and Japan

Airlines were mostly down because the oil price rose above $63 a barrel, but as I said, airline ticket  prices are rising and have the potential to rise even more than oil. I don't worry all that much about oil prices, as I see much more capacity coming to that market.

I'll continue holding AMR.

[David Randolph]

I'll listen to this presentation by AMR's CFO on December 7:

AMR CORP Files SEC form 8-K, Regulation FD Disclosure

AMR touched the TL2 support and seems ready to push higher. Bears will be surprised and confused, to see airlines up, even with oil rising.

Aircraft fuel represents 32% of AMR's expenses. So, if oil goes up 20% AMR's expenses will rise about 6.4%. I think this is relevant, but not the only factor. Airline ticket prices rose more than that over the last 12 months, yet, nobody is paying attention to this trend.

I'll continue holding AMR.

[David Randolph]

Wow, spectacular bounce from the TL2 support !

I guess I'm going to be right on the following:

I don't have a problem with this correction, as I firmly believe, giving the technicals and fundamentals of this stock, it will close 2006 above $35.

Oil went down 1.56% so that helped. But as I said that's not the main issue on airlines, but increasing demand across the board and a strong fundamental turnaround.

I'll keep on holding AMR, up 11% from my buying point now.

[David Randolph]

AMR released this yesterday after the close: AMR's American Airlines Traffic Falls in November on a Decrease in Capacity; Load Factor Up

Nothing unexpected. People sold the stock at the open but it came back late in the day to finish almost unchanged. Either you look at technicals (check the bull trend on the chart below) or fundamentals (check the initial analysis or the average EPS expectation for 2007, of $4.46 a share) the response is the only way is up for AMR.

[David Randolph]

Nothing new on AMR today, I'll continue holding the stock.

[David Randolph]

Some minor but positive news on AMR:

American Airlines and Gulf Air Announce Reciprocal Frequent Flyer Agreement

Oil went up 0.21% to $62.32. I think it can go a bit higher from this level, but it wouldn't surprise me to see it fall $10 either. I'm neutral on oil, I believe supply and demand are balanced at current levels.

AMR had no new technical or fundamental developments, I'll continue holding it, showing a 9.8% profit for the 3 Stocks on Fire Portfolio.