For sure, to be an airline company in the past year-and-a-bit has been difficult. Many airline carriers had to revert to drastic cost-cutting measures, which involved laying off workers. Many smaller, less cash-rich carriers, were forced out of business, such as Flybe, German Airways and some smaller ones in the LATAM and Asia regions. Although the bigger airline companies did take strong financial hits as well, still, they have managed to push through the pandemic. With the coronavirus restrictions getting slowly lifted across the globe, there might be a light at the end of the tunnel for the airline industry, and especially for the major airline companies. The International Airline Group (BME: IAG) is seen to be one of those big companies that might be able to come out of the pandemic with a win. Given that the company is partially owned by the cash-rich Qatar Airways, IAG was able to withstand most of the negative shocks related to the movement restrictions. But because people are now starting to slowly enjoy their freedom of movement again, the desire to visit places outside of their countries is huge, meaning the demand for flights could pick up again.
From the business perspective, the bankruptcy of some smaller airline companies had opened a window of opportunity for the bigger players, such as IAG, as they may fill the empty flight routes, which were operated by the smaller industry players. Certainly, this could be an issue for the financial regulators, monitoring competitiveness in the airline industry and its barriers for entry. However, due to the economic downturn from the pandemic, the regulators may look the other way for a while, in order to get the airline industry up and running again.
Looking at the technical picture of IAG, we can see that the share price continues to balance above a medium-term upside support line taken from the low of October 30th. On the other hand, the stock is still trading below a short-term downside resistance line taken from the high of March 16th. The fact that the price is stuck between the two lines, IAG could be getting squeezed, which may lead to a breakout. For now, we will take a neutral approach and wait for a break of one of the lines, before examining the next short-term directional move.
A break above the aforementioned downside line and a push through the highest point of May, at 2.463, might open the door for higher areas, as more new buyers could step in. The share price may rise to the 2.541 and 2.572 levels, marked by the highest points of April and March respectively, where a temporary hold-up might occur. That said, if there is still enough buying interest among investors even at that price, the IAG could drift to the 2.768 level, marked by the inside swing low of June 12th.
The RSI and the MACD recently started pointing a bit higher. In addition to that, the RSI is still above 50 and the MACD had just jumped above zero and continues to run above its trigger line. The two indicators seem to be in support of the above-mentioned scenario by showing positive price momentum.
Alternatively, if the previously discussed upside line breaks and the share price falls below the 2.207 hurdle, marked by the low of May 20th, that could keep new buyers away for a while. The stock may travel to the lowest point of March, at 2.101, a break of which might lead IAG to the 1.999 zone, marked by the highest point of November 2020. If there are still no new buyers at that price, the stock could fall further, potentially testing the 1.880 level, which is the high of February 16th.
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