EarningsBeats.com Digest for June 5, 2020
This Industry Group Has Finally Taken Off!
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Do you know that feeling when you give up on a stock and sell it just before it explodes? It's happened to all of us, right? Well, I can only imagine what Warren Buffett is thinking right now. He infamously announced that Berkshire Hathaway had sold every single share of every single airline it owned. This hasn't happened often in Mr. Buffett's career, but I think he may have marked the bottom. If you haven't seen airlines ($DJUSAR),
you have missed quite the take-off:
There are two key factors here. The first is Wall Street's belief, right or wrong, that COVID-19's massive impact on our economy will be very short-lived. There is no industry group, in my opinion, that is more likely to suffer from lingering COVID-19 issues than airlines. Yet, the group has all of a sudden caught fire. It's simply confirming what the market has been hinting at for weeks - that
both our market and our economy is more likely to be V-shaped than U-shaped. The second key right now is short interest. Airlines have been among the most heavily-shorted industry groups. Did you see American Airlines Group's (AAL) 41% rise yesterday? As of May 15th, AAL's shares short totaled 147.6 million. That's roughly 35% of its float. AAL is on our Short Squeeze ChartList and shorts are now likely in full panic mode, especially given AAL's 25% move
higher in pre-market action this morning.
I wrote in my Daily Market Report to members yesterday that the NASDAQ looks toppy and to expect more short-term rotation into areas that have underperformed. That's become the theme of late and is extending at least into today's pre-market action. For EB.com members, that Short Squeeze ChartList is one I'd continue to watch closely for explosive breakouts like AAL. For non-members, consider our fully
refundable $7 30-day trial and download all of our ChartLists! Trials valid once per customer.
Happy trading!
Tom Bowley
Chief Market Strategist
EarningsBeats.com
Better Timing. Better Trades.
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