Stock Of The Day: Delta Air Lines Bullish Pattern Suggests Upside Ahead

Shares of Delta Air Lines, Inc. DAL traded relatively flat on Wednesday as the company hosted its Investor Day, an event designed to provide institutional investors with insights into Delta's future prospects. Ahead of the event, Delta reaffirmed its recent guidance.

A classic Japanese Candlestick pattern has formed on the chart. This is why our team of technical analysts has made it our Stock of the Day.

Candlestick charting, a technique developed by Japanese rice traders over 700 years ago, remains remarkably relevant today. The same patterns those traders analyzed centuries ago are still used by market participants around the world.

Chart patterns are graphical illustrations of the psychology of the traders and investors trading the security on the chart. And while many things have changed in seven centuries, one thing that hasn't is human psychology.

Tuesday’s trading created a “Bullish Engulfing Pattern, ” which suggests that the shares may be about to trend higher.

Sometimes, a market’s leadership can change from bears to bulls over an extended period of time. But other times, the leadership can change in one day. This is what a Bullish Engulfing pattern illustrates.

On Tuesday morning, it looked like the recent downtrend was going to continue, as shares opened lower than Monday's closing price.

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By the close on Tuesday, things looked very different.

Buyers entered the market and overpowered the sellers. By the end of the day, they had pushed the shares higher. The closing price on Tuesday was higher than the opening price on Monday.

As you can see on the chart, this price action engulfed Monday's trading range. The bulls had taken over.

Technical analysis has a dubious reputation. Like many things on Wall Street, it is widely misunderstood. Some think it is analogous to astrology or reading tea leaves.

But if applied correctly, technical analysis is the study of investor and trader psychology.

Although many things have changed since the markets formed centuries ago, human psychology has remained the same. This is why the same patterns have appeared on charts for hundreds of years and will continue to do so in the future.

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