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TORONTO (GlobeinvestorGOLD) — Weak global economies, SARS, and war in Iraq have all taken their toll on the travel industry, but technical analysis of the sector suggests that it is finally beginning to emerge from its consolidation period, which spanned almost two years.
However, unforeseen obstacles are always a part of life and just as WestJet Airlines is poised to take off, it has encountered some turbulence on both the fundamental and technical fronts.
WestJet's fundamental plans, to move its eastern hub from Hamilton to Toronto's Pearson International Airport and consolidate its existing flights from Terminal 3 and its planned expanded schedule of operations into the new Terminal 1, have been put on hold temporarily as a court ruling gave its insolvent competitor Air Canada all the gates at the new terminal for the time being. WestJet, which plans to triple its weekly departures to from Pearson on April 18, has been assured by the Greater Toronto Airports Authority (GTAA), which runs the airport that it will have the facilities to operate its expanded schedule.
Technically, although the stock has a short-term sell signal, as it trades below its 10- and 20-week moving averages (MA), it is trading well above its 200-week MA, which is very positive. Longer-term, the share price is in the midst of forming a bullish pennant pattern. The pennant is identified by two converging trendlines and resembles a small symmetrical triangle. As pennants are said to "fly at half-mast" from the flagpole, the measuring technique for this continuation pattern is to calculate the length of the flagpole, and add that length to the breakout point. In this case I am projecting the breakout point to be about $31 for a potential target price of $44.25.
Four Seasons Hotels Inc. also appears to be benefiting from investor confidence. Technically the stock has formed a saucer or rounding bottom. The longer it takes for a saucer bottom to form the more significant it becomes as the potential for a subsequent move to higher prices is more certain. The pattern is relatively infrequent and it appears at major market bottoms. In the case at hand it has taken almost two years for it to form.
As is usual with this pattern, the share price is forming a consolidating handle or platform to the right. It is unknown how long the consolidation period will take but once the stock closes above its previous high of $79.08 it will signal a breakout and a rally to new highs will be at hand.
Yola Edwards is a contributing writer and technical analyst for Bell Globemedia Interactive, providing options and technical analysis research on a variety of North American equities.