Delta Air Lines (DAL) will announce earnings on Wednesday, ahead of the open, in what has become a negative environment for the sector. Along with the recent overbooking debacle by United Continental Holdings (UAL), the sector has come under increased scrutiny following excessive fees and higher fares.
Although the sector has delivered solid earnings beats over the past year, rising fuel and labor costs have chipped away at profits. Delta is expected to report a profit of $0.74 a share on revenue just south of $9.2 billion. While impressive on paper, this would represent a drop of 44% drop in earnings due to higher costs.
The chart for DAL shows a bearish setup following the 52-week high of $52.76 from early December. The $52 level has been challenged throughout this year but the March drop below $46 was damaging and a level that now serves as near-term resistance. Support is at $44-$43.50 and the 50-day moving average.
A mini death-cross has formed with the 50-day moving average falling below the 100-day moving average. This is typically a bearish setup and a continuation pattern of the current trend to the 200-day moving average would confirm lower lows down the road. In the meantime, shares could remain volatile with upside potential on an earnings beat-and-raise quarter.