In 2009, American Airlines stock fell below the 2-dollar mark and the skies were looking so dark, it was hard to imagine a plane flying up there again. Six years later, all the problems seemed to be forgotten as the stock reached as high as 56.20 in January 2015. But then, American Airlines started declining once more. On August 24th, the “Black Monday”, it plummeted to 34.08. Right now, we could easily say American Airlines stock is in a bear market. But how low could we expect the price to fall? Could we see the levels from 2009 again? Let’s hear what the Elliott Wave Principle has to say about it.
As visible, the recovery from below $2 to above $56 is a very nice five-wave impulse. This means the recent sell-off is part of the natural three-wave correction, which should be expected after every impulse. Keeping that in mind, we suspect the retracement is not over yet. The weakness from 56.20 to 34.08 could be labeled as wave A, so waves B and C remain. That is why we believe it is too early to “buy the dip” now, because the corrective pull-back is likely to extend. From an Elliott Wave point of view, it might take a couple of years, before American Airlines becomes attractive to investors again.
