Easyjet has now closed under the 0.564p level (at the SMA 50 level, 50 day moving average), which it tried to surpass for the 2nd time and failed to do. This is the 3rd time in just over a month that it has failed to go above this point, a signal that it has become the new high. In late November, some bad news came for the airline industry, with the fear that travel routes would be closed on an international basis, which was the case for flights to eastern and southern regions of Africa. After these events, everyone panicked and sold on the 25th of November like no tomorrow.This was, however, merely a continuation of the long-term sell off, which began on the 12th of July, when the SMA 100 moved above the SMA 50. That moment seemed to have been a large indicator in the market, as the promises of a great summer 2021 for travel waned. Sure enough, on the 12th, at 944, a historic sell-off began with incredulous might. By the end of the day, the stock closed right under 900, at 899.6, right from where the long rally had begun on the 24th of March. Before early May, there was apparent hope for the stock, no exponential or odd growths, little gaping, and natural retracements. By the 28th of June and all the way till the 12th of July, the market was sitting in a deadlock between 900 and 950, with all attempts to get out of it failing. 950 was also an important line of resistance throughout May as well as being the departure point of a mild but unsuccessful rally from the 30th of March till the the 7th of April. It was difficult to see how the market was going to move from that date of the 28th of June. Yes, the downtrend from early May to late June had been significant, going from 1.095 to 0.950p, but the box between 900 and 950 had been established, and now there was uncertainty as to where the market would go. However, 2 indicators could have helped to the market to position itself in a bearish fashion. Firstly, the visible convergence of the 2 moving averages (with the SMA 50 going under the SMA 100) and the first weekly closure of the market under the SMA 100 on the Friday preceding Monday the 28th of June since early November 2020. Although there had been 2 such closures on the 15th and 16th the preceding week, on Monday and Tuesday, these were not nearly as significant as that of the Friday preceding the 28th, the 25th, as that was when traders would close their positions for the week. Such a bearish indicator was later to be proven important for the subsequent downtrend that ensued. Secondly, the 28th was the reestablishment of a well-known resistance line at 0.900p, which as we have explained, was the takeoff point on the 24th of March. This too, maybe, incentivized people to tend towards a more bearish position. By the 13th of July, the position under 0.900 had been practically established, with a practically non-existent upward tail. What followed during the rest of July seemed to be an x-axis reflection of the March 24th to April 12th rally period, with similar temporary direction changes at 6-8 days after the beginning of those more long-term moves. On the 29th of July, we reached 0.900p again as a high, but closed well under it at 0.881p. This was a sign that it would be a long time before 0.900 would be reached again. A gradual down movement began from that moment forth till the 8th of September, as negotiations of a potential takeover of Easyjet by Wizz Air were taking place. Then on the 9th, at the announcement of Easyjet rejecting Wizz Air’s takeover bid, the market crashed, going from 0.756 to 0.708, with Easyjet instead launching a £1.2 billion fundraiser from its shareholders, therefore increasing share volume from 2’576’669 to 10’813’000, by 420%, between the 8th and the 9th. The next day was Friday the 10th, and the market closed on its bottom at 0.680p, a terrible sign. On the next Monday, the market was reset to 0.570. The cash inflow of £1.2 billion progressively began to resuscitate the airline, as it gradually recovered, without gaping and enormous tails, till the 28th of September, at the first signs of gaping the previous day (at the price of 0.705p), where there was a change of tide. In normal times, airline markets tumble during the late September and October period, and this is the time when many go bankrupt. They are not always ready to face the upcoming winter and a rise in fuel prices, and are worried as to whether they can financially survive for another year. Often, a large amount of competitive start-ups in the next year is expected, and the market exaggerates the amount of potential passengers that airlines will carry during the winter period. This was, in the case of this year, added to the fear of more disease and the apparently never-ending Brent crude oil rally against the US Dollar. Surely enough, a downward progression began on Monday the 4th of October till the 20th, before a slight rise from 0.591p all the way to 0.654p on the 8th of November, where it touched the SMA 50, before going down sharply again. This 0.580p to 0.591p area was where our mid-September rally began from, as well as a dive on Friday 18th of September 2020 down to 0.530p. The relationship here may be more incidental, but does show an important fluctuation point at 0.591p. All of November was bad news, the market going from 0.654p to 0.551p on the 25th of November. On the 25th, the high at 0.570p was established, before a gap in the market resulting in it being set at 0.480p the next day, a Friday. From then on till the end of the year, we’ve had 2 attempts at getting to 0.570p, both of which failed, on the 7th and 29th of December, the latter of which practically touched the SMA 50 line at its 0.577 high, before closing down at 0.550p, down 2.31% on the day. During this period, the 0.483p low has repeatedly been attained, but not really been broken through. This is definitely a resistance point, and one to watch out for next year.
Easyjet has had a poor year, in spite of a brilliant start. The aviation industry in general, has been bearish this year. Although we would love to see our industry expand, we sometimes doubt whether it will again. But there is hope in the many new start-ups that have begun operations this year, and maybe the market has simply moved to Asia, where airlines such as Asiana, Korean Air and ANA have all grown by a minimum of 7.73% on a year to date basis. My secret: let’s focus on Korea next year. With this Aeronews24/McCloud, wishes you a happy new year and more faith and hope in all aspects of life! 31st of December 2021.
Aeronews24 