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.

It’s always hard to predict how or when the Street will react to news. On some occasions it's immediate and other times it's not. The delayed reaction to Southwest Airlines LUV computer issues makes it the PreMarket Prep Stock Of The Day.

Retreat Mode Since MId-April: It's well known that Southwest Airlines more than participated in the broad markets rally off the March low as a coveted “reopening stock.” When it bottomed last March at $22.47, it was the lowest level since April 2014, when it bottomed at $22.35.

After failing to make a new all-time high from December 2017 ($66.99) in mid-April with the rally stalling at $64.75, the issue has been under selling pressure. Last Friday, it posted its lowest close for the retreat at $57.28.

Not One But Two Computer Issues: On Monday, it struggled with connectivity issues as a weather data supplier delayed 1,541, or 41%, of its flights. On Tuesday, it was connectivity problems once again, which resulted in 500 flights, or 15%, being canceled. The company said the problems were unrelated.

Monday News After The Close: Since the problem wasn't reported until late Monday, the price action from that session didn't reflect investor sentiment. For the session, the issue matched its previous day's high of $58.06, reaching $58. It ended the session slightly in the red by $0.29 at $57.28.

Tuesday’s Reaction: Despite the news being well circulated on the newswires before the open on Tuesday, the issue still attempted to rally. In fact, it came very near the highs from the double top from the last two sessions at the $58 area, peaking at $57.85.

Sellers came into the issue and ended well off the intraday high, lower by $0.16 to close at $57.12. Certainly a decent performance after back-to-back computer issues.

Wednesday’s Reaction: Finally, the Street elicited a stronger reaction to the news in Wednesday's session. After a flat open, it found willing sellers just above Tuesday’s close ($57.12) at $57.24 and took a turn for the worse.

As of 12:30 p.m. EST, it made a new low for the recent slide, surpassing the former low ($56.77) reaching $56.47 and reversed course. At this time, it’s attempting to reenter the $57 handle.

Trading The News: Although Southwest Airlines isn't a popular day-trading stock and most retail traders don't short issues, there can be opportunities for investors that are looking to go long the issue.

If an investor views the problems as a non-event and is looking for the issue to rebound, they now have a good reference to lean on. The current low ($56.47) just happens to match its March 24 low ($56.42), establishing a potential double bottom or a possible exit point if the retreat continues.