Yesterday, most global stock markets suffered heavy losses on fears of contagion from the Evergrande crisis.
However, not all sectors had a bad day and, in particular, it was an exceptional day for airlines.
This sector has been one of the hardest hit since the beginning of the coronavirus pandemic. Industry forecasts remained negative in the face of heavy losses due to continued restrictions on international mobility.
However, yesterday, White House Covid-19 response coordinator, Jeff Zients, announced that the US plans to relax travel restrictions on all fully vaccinated foreign visitors from early November onwards.
The impact of the news was swift and within minutes, investors were returning to the airline industry with an improved outlook for the fourth quarter of the year.
Depicted: Admirals MetaTrader 5 – IAG H4 Chart. Date Range: 21 April 2021 – 21 September 2021. Date Captured: 21 September 2021. Past performance is not a reliable indicator of future results.
The chart above shows the evolution of the IAG share price over the last five months on a four-hourly basis.
It can clearly be seen that throughout this period traders have traded IAG shares in a range, within a bearish channel of approximately 33 GBX in width.
The improvement in sales forecasts for the fourth quarter has triggered a strong upward movement, which has broken through the resistance of this channel.
Traders have started to look for new potential profit taking levels.
Following the characteristics of this technical figure, this level could be reached in the next hours in an area close to 180 GBX, represented by the green horizontal zone. In this area we could expect an increase in selling pressure.
This level is the result of the sum of the 33 GBX of amplitude of the channel and the breakout point of this channel, 157 GBX, represented by the red horizontal line.
However, it is important to take into account the signals provided by other indicators such as the RSI indicator, which is currently in an overbought zone.
Some traders have already relied on this indicator to take profits after breaching the 85 level. Will they re-enter the market if the RSI falls below 70?
This pattern will hold as long as IAG’s share price remains above 157 GBX.
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