PreMarket Prep Stock Of The Day: Southwest Airlines

Benzinga's PreMarket Prep airs every morning from 8-9 a.m. ET. During that fast-paced, highly informative hour, traders and investors tune in to get the major news of the day, the catalysts behind those moves and the corresponding price action for the upcoming session.

On any given day, the show will cover at least 20 stocks determined by co-hosts Joel Elconin and Dennis Dick along with producer Spencer Israel.

The reopening trade has had a hard time getting off the ground as of late and Southwest Airlines Co. LUV isn't helping things. Its price action following a slew of cancellations makes it the PreMarket Prep Stock Of The Day.

Short-Term Price Action: On a relative performance, the airline didn't perform last week. While the S&P 500 index added 2%, Southwest was slightly in the red, falling from $54.35 to $53.92.

One contributing factor for its decline, along with others in the sector, was a rating change for its peers Jet Blue Airways JBLU and American Airlines Group Inc. AAL. On Wednesday, Oct. 6, Goldman Sachs downgraded both of those issues despite higher bookings by some of its peers. The primary reason being rising oil prices, which is one of the major expense items for the sector.

It should be noted that oil prices have soared $3 higher since Goldman cited it as a headwind for the airline industry.

Grounded Over The Weekend: Southwest Airlines canceled more than 1,800 flights over the weekend and the scrambling to return to its normal operations.

More concerning is that the company cited air traffic control issues and unfavorable weather conditions as the cause for the cancellations. These problems seemed to be unique as they were the sole airline to report issues of this magnitude.

Many speculate the disruption in service was the result of the company becoming the first airline to impose COVID-19 vaccine mandates on its staff.

PreMarket Prep Take: When the issue was being covered on the show, it was trading in the lower $52 handle, down by over $1.50 from Friday’s close. Co-host Dennis Dick was hands-off.

“What is the next headline going to be? If you are trying to trade this off the technicals you could be blind-sided by the next negative headline,” he said. “I tend to shy away from issues with so much headline risk.”

Both hosts of the show cited daily support at the $51 area. The reason being, the issue had a pair of lows surrounding that level from Sept. 23 ($51.05) and Sept. 30 ($50.88). The hosts were skeptical it would fall to that low based on the news and how far it would have to decline to reach that level.

The full discussion on the issue from Monday’s show can be found here:

Price Action: After a much lower open ($51.99 versus $53.92), the issue attempted to reach the lower end of Friday’s range ($53.52), but came shy, only reaching $53.33 and reversed course.

The ensuing decline found support ahead of the major support mentioned at the $51 area, reaching $51.60. As of 3:30 p.m., it has rebounded back into the higher $52 handle.