Since the beginning of the pandemic, airline companies have suffered massively, as they were forced to ground their planes due to global travel restrictions. European airline firms were among those hit the most, as some had to seek financial support from their governments. Companies like British Airways, Iberia, Aer Lingus and Vueling, which belong to the International Airlines Group (BME: IAG), had to re-think their strategies, in order to be able to survive. That involved large cost-cutting measures to be implemented, involving downsizing their fleet and proceeding with staff lay-offs. One of the subsidiaries of IAG, LEVEL airline, is shutting down some of its branches across Europe. After the Austria-based LEVEL Europe closed down, it is now believed that LEVEL France will follow suit. Only a small part of the company, based in Barcelona, will remain operational for now.
Despite the easing of the European lockdown measures in the beginning of summer, airline companies continued to struggle, as they cannot find much needed demand, because a huge part of holiday-makers chose to stay in their countries, or they opt in for ground-moving transportation. All this is harming severely the airline giants, such as IAG. However, a lot will depend on the global situation with the coronavirus. If the pandemic continues and there is another European lockdown, this could be catastrophic even for big holding companies like IAG. But if the world will manage to bring the infection numbers down, stocks like IAG might become a real bargain. That said, we are not at that stage yet, and hence why, for now, we will take a wait-and-see approach.
Looking at the technical picture of IAG, after recovering somewhat in the beginning of June, the stock drifted back down again and is now trading below a short-term tentative downside resistance line taken from the high of June 16th. That said, today, we are seeing a hold-up near the low of July 1st, at 2.338, which keeps the share price from dropping further. But if eventually that hurdle fails to provide further support, its break may lead to some more declines.
A drop and a daily close below the 2.338 zone could open the way for IAG to test the 2.114 obstacle, which marks the lows of May 22nd and 25th. If the fall doesn’t stop there, the next potential support area could be at 1.988. That area marks the inside swing high of May 15th.
The RSI and the MACD continue to indicate negative price momentum. The RSI is below 50 and points slightly lower. The MACD is below zero and its trigger line, and also points a bit lower. Such a picture supports the above-discussed scenario.
Alternatively, if the aforementioned downside line breaks and the price manages to climb above the current highest point of July, at 2.630, that may interest some new buyers, as it might give a bit of hope that the stock could go for a larger recovery. That’s when we will aim for the 2.764 obstacle, a break of which could set the stage for a move to the 2.937 level. That level marks the high of June 23rd. IAG could receive a hold-up there, as by the time it may take the share price to rise to that level, the 200 EMA could approach that zone as well and help stall the acceleration.
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