Will US Airways Climb Higher?

With shares of US Airways (NYSE:LCC) trading around $16, is LCC an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

T = Trends for a Stock’s Movement

US Airways operates and owns passenger and freight airline carriers. Consumers and companies across the nation are now looking to travel at an increasing rate. Since air travel is quicker and is becoming less expensive, it is becoming a common transportation method for many. As costs decrease and flights become more efficient, look for business and retail customers to fly more than ever.

Recently, US Airways and American Airlines proposed an $11 billion merger that is coming under scrutiny because of concerns that certain cities will lose hubs or face cutbacks. The deal will also be investigated for its impact on consumers and competition. Companies and consumers worldwide look to travel at increasing rates since air travel is quicker and is becoming less expensive. As costs decrease and flights become more efficient, US Airways stands to see soaring profits as consumers and businesses look to air travel as a viable option.

T = Technicals on the Stock Chart are Mixed

US Airways stock has been flying higher over the last year or so and looks to still have room to go. However, the stock is now digesting gains from a recent run so it will need to form a base before it really gets going. Analyzing the price trend and its strength can be done using key simple moving averages. What are the key moving averages? The 50-day (pink), 100-day (blue), and 200-day (yellow) simple moving averages. As seen in the daily price chart below, US Airways is trading between its rising key averages which signal neutral price action in the near-term.

LCC

(Source: Thinkorswim)

Taking a look at the implied volatility (red) and implied volatility skew levels of US Airways options may help determine if investors are bullish, neutral, or bearish.

Implied Volatility (IV)

30-Day IV Percentile

90-Day IV Percentile

US Airways Options

49.89%

90%

88%

What does this mean? This means that investors or traders are buying a very significant amount of call and put options contracts, as compared to the last 30 and 90 trading days.

Put IV Skew

Call IV Skew

July Options

Flat

Average

August Options

Flat

Average

As of today, there is an average demand from call buyers or sellers and low demand by put buyers or high demand by put sellers, all neutral to bullish over the next two months. To summarize, investors are buying a very significant amount of call and put option contracts and are leaning neutral to bullish over the next two months.

On the next page, let’s take a look at the earnings and revenue growth rates and the conclusion.