The Daily Breakdown looks at the dip in Delta Air Lines, as well as the low trading volume in the US stock market.
Wednesday’s TLDR
- Stocks chop in a tight range after record highs.
- ConocoPhillips buys Marathon Oil.
- Nvidia racks up another record high.
What’s happening?
A few weeks ago, the S&P 500 broke out to new highs. Since then though, it’s mostly chopped around, not gaining or losing more than 1% from the closing price on May 15.
We’ve seen consolidating price action elsewhere too, as Bitcoin digests its recent rally and as the Nasdaq 100 is only up 1.5% since May 15 despite the explosive rally in Nvidia over the last few days.
From a volume perspective, it already feels like we’re in the dog days of summer. I’m not quite certain on why volume has dropped so much, but that’s the environment we find ourselves in.
The trailing 20-day average trading on the SPDR S&P 500 ETF SPY is 52.4 million shares. A month ago, this figure stood at 72.6 million. Three months ago it was at 71.8 million.
So far, low volume has been favorable for bulls. But with a slowdown in the rally, some are looking for a dip. While a pullback could be healthy, a full-blown breakdown doesn’t appear to be in the cards right now.
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The setup — DAL
Shares of Delta Air Lines are moving lower on Wednesday morning after American Airlines lowered its Q2 profit forecast.
Delta — which hit a 52-week high just a few weeks ago — is being dragged down too, adding to the recent dip. However, the decline has the stock set to open at an interesting level on the chart.
That’s as shares approach the 50-day moving average and prior resistance. Will these combine to act as support?
If support holds, bulls can look for a bounce. However, if support doesn’t materialize, it may be best for investors to consider a stop-loss to prevent small losses from turning into big losses.
Options
This is one area where options can come into play, as the risk is tied to the premium paid when buying options or option spreads.
Bulls can utilize calls or call spreads to speculate on a rebound, while bears can use puts or puts spread to speculate on more downside should support break.
For those looking to learn more about options, consider visiting the eToro Academy.
That being said, investors can be neutral on DAL and choose to do nothing with the stock. Remember, you don’t have to be involved with every stock all the time.
What Wall Street is watching
MRO — Shares of Marathon Oil are in focus on Wednesday morning after ConocoPhillips has agreed to buy the firm in an all-stock deal. The deal weighs in with a $22.5 billion enterprise value, including $5.4 billion in debt.
DKS — Dick’s Sporting Goods is rallying on Wednesday morning after the retailer delivered a top- and bottom-line beat for its Q1 results. Revenue grew 6.3% year over year, while management raised its full-year revenue and earnings outlook above consensus expectations.
NVDA — Nvidia stock hit a new record high for the third consecutive trading day, spurred by news of Elon Musk’s xAI buying Nvidia AI chips for a supercomputer. The supercomputer will use Nvidia’s H100 GPUs, aiming to enhance xAI’s AI chatbot, “Grok.”
Disclaimer:
Please note that due to market volatility, some of the prices may have already been reached and scenarios played out.