American Airlines Group Inc (NASDAQ:AAL) is one of the beneficiaries of being included in a major stock index and enjoy the resultant attention from the various mutual funds that track and closely mimic the index. These index funds must buy this stock now to keep their tracking error-free as American Airlines Group Inc (NASDAQ:AAL) has replaced the Fort Worth based company Allergan in the S&P 500 index last week. Friday was the last session of Allergan trading as a part of the broader index and obviously, that culminated in a huge buying of AAL, as evident from the volume of more than 137 million against an average of 10 million only. The price appreciation is not to be ignored too, as the stock rallied to $55.76 from $50.22 in the last week, a gain of 11% in price and nearly $4 billion in market capitalization.
American Airlines Group Inc (NASDAQ:AAL) had filed for bankruptcy in late 2011 and came out of the Chapter 11 proceedings only in 2013 December. That makes it the fastest airlines company to re-enter the broader index after bankruptcy.
Technically, the stock presents a very bullish chart as the 6 month rally from the $28 levels to $56 level can’t be ignored. It can be argued that the stock has not really gone anywhere in the last 3 months as it remains stuck in the range of $46-$56 and if follow up buying is not seen immediately, the rangebound moves can continue but that doesn’t change the fact that the structure remains strong and this sideways phase is at most a pause in the long term uptrend.
Immediate support can be expected at $51-52 levels and around $45-46 in the lower region. Investors may wait for a proper dip to invest with a lower risk.