Key Takeaways
A technical analysis from Barron's suggests a significant pair-trade opportunity in the airline sector, favoring LATAM Airlines Group (LTM) for a 70 percent upside while projecting a decline for Delta Air Lines (DAL).
"The setup favors LATAM as the more compelling opportunity within the airline space," Doug Busch, senior technical analyst at Barron's Investor Circle, wrote.
The bullish case for LATAM hinges on its chart completing a bullish "island reversal" and forming a cup base. Busch suggests entering at $54.50 and projects the stock could reach $95 within a year, representing a more than 70 percent gain. Conversely, Delta's chart shows a potential bearish "triple top" at the $75 level, with several long bearish candlesticks indicating powerful selling pressure. Busch recommends shorting Delta near $73.50 with a target of $65.
This trade thesis pits LATAM's exposure to expanding regional and emerging-market travel against Delta, whose post-pandemic recovery strength appears largely priced in. While Delta has outperformed recently, its chart shows signs of exhaustion, whereas LATAM's technicals suggest a new upward run is beginning.
LATAM Airlines, the largest airline group in Latin America, is up 86 percent over the last year. According to the analysis, its stock is now back above its 50-day and 200-day simple moving averages and its 21-day exponential moving average. The completion of a bullish island reversal and the formation of a cup base are strong technical indicators pointing toward significant upside. The $95 price target implies a substantial rally from its current trading level of around $55.
Delta Air Lines, while up 82 percent over the last year, is showing signs of a potential reversal. The analysis highlights a possible "triple top" pattern forming around the $75 mark, a classic bearish indicator. This is coupled with multiple "long bearish filled-in candlesticks" in recent months, which signal strong selling pressure and often precede trend reversals. The V-shaped nature of its current cup base makes it more prone to failure, according to Busch.
The analysis suggests the market may be rewarding LATAM's leverage to international travel trends over Delta's more mature recovery story. Investors will watch to see if LATAM can break out towards its $95 target while Delta succumbs to the bearish technical pattern.
This article is for informational purposes only and does not constitute investment advice.
