Delta Air Lines, Inc. (DAL) & United Continental Holdings Inc (UAL): Is It Finally Time To Sell Airline Stocks?

The real concern regards third-quarter forecasts as $3 jet fuel is bound to lead analysts to dial back their expectations. Compounding that concern, the economic troubles in China are leading to a slowdown in Asian travel, among both consumers and business travelers. That’s an especially big concern for Delta Air Lines, Inc. (NYSE:DAL) and United Continental Holdings Inc (NYSE:UAL), which have a relatively larger presence in the Pacific travel market.

On a purely technical basis, the airline stocks already appear to be hitting resistance. A key airline index has made repeated runs toward the upper 50s and has failed to follow through. It’s hard to know of the global economic turmoil (in emerging markets) or rising fuel prices, but it’s clear that the mood has begun to shift.

Risks to Consider: As an upside risk, accelerating growth in the U.S. economy could offset air travel weakness elsewhere. Moreover, oil prices may cool off in coming weeks if China continues to give off signs of a slowing economy.

Action to Take –> If you have profited from the great run in airline stocks, it’s might be time to book profits. Yet this is a sector you need to keep monitoring. When investors shed their exposure to this industry, they tend to overdo it. Falling profit forecasts invariably lead to fresh concerns about industry balance sheets, though as noted earlier, those concerns are really misplaced. When the major carriers fall out of favor, compelling bargains are bound to re-emerge.

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This article was originally written by David Sterman and posted on StreetAuthority.