IBD's airline industry group is up about 60% from April lows, but most stocks in the group are either too extended or in weak chart patterns. The antidote: JETS stock, an exchange traded fund that holds the major U.S. carriers, which just happens to be in a buy zone.
On Friday, the U.S. Global Jets ETF jumped more than 5% amid a broad market rally and broke out above the 25.88 buy point of a flat base. The buy zone goes to 27.17. The exchange traded fund's Relative Strength Rating of 80 beats the 56 RS Rating of the industry group.
This is a good example of how an industry ETF can become a good alternative when there are few or no clear leading stocks in an industry group. As of Wednesday, the only actionable airline stock was SkyWest. The IBD Stock Of The Day on Aug. 18 is in buy range from the 119.44 buy point of a cup-with-handle base.
Delta Air Lines is almost extended from the 58.30 handle entry it cleared on Aug. 12.
But other airline stocks are in disrepair, trading below the long-term 200-day moving average or extended from previous buy points. Ryanair, which has the highest Composite Rating in the industry, gapped below its 21-day exponential moving average on Wednesday.
U.S. Global Jets holds nearly 50 stocks, including not just airlines but also travel booking services such as Expedia and TripAdvisor. Aircraft companies such as Boeing, Airbus, Textron and Embraer are smaller pieces of the fund.
The $841 million fund's largest holdings are United Airlines, Delta Air Lines and American Airlines, each with more than 10% of the portfolio.
JETS Stock And Airlines' Outlook
The industry jolted higher on Aug. 12, when the July consumer price index showed airline fares increased 4% over the month, after declining 0.1% in June and falling 2.7% in May. The good news on pricing came on the same day that ultralow-fare Spirit Aviation Holdings warned it is at risk of going out of business.
Higher fares in July also appeared in the Global Airfare Monitor by investment bank UBS. Data shows fares accelerated for all airlines except Southwest and JetBlue.
The firm's Evidence Lab also saw bookings accelerating in July, based on app activity. American, Delta and United saw some of the best improvement, analyst Thomas Wadewitz wrote in an Aug. 13 report.
