As I have mentioned in previous articles, oil prices are expected to be “lower for longer”. With prolonged oil prices, could the airline industry be setting up for moves higher? This article will feature Spirit Airlines (SAVE) since it has been a Trendy Stock Charts favorite. Several Trendy Stock Charts members either trade SAVE or have expressed interest in trading it.

Spirit Airlines is known for being able to squeeze everything they can from their margins, according to one of our Trendy Stock Chart members. That viewpoint seems pretty accurate from when I’ve seen the CEO of Spirit Airlines (SAVE) on different financial shows.

So with some positive factors going on, let’s review some charts!

Spirit Airlines (SAVE)

It’s been a little while since I’ve reviewed some charts for Spirit Airlines (SAVE), so I am going to begin with a 5 year monthly chart. A monthly chart is better for looking at longer-term trends. Here are some positively bullish signs on I see on the chart:

• The MACD Histogram is trending in the right direction
• There has been more buying volume than selling volume during SAVE’s uptrends
• SAVE’s share price has moved past the Fibonacci Extension Tool’s 61.8% Target Line, a common place of uptrend failures

Analyzing a 5 Year Monthly Chart for SAVE to Determine Upside Potential

From just looking at this monthly chart, I would say that any pullback to the[s2If !current_user_can(access_s2member_level1)]…..

If you want to continue reading this article, you must first sign in. If you are not a Trendy Stock Charts member, consider joining today. I have several different subscription plans to chose from.[/s2If][s2If current_user_can(access_s2member_level1)]$52.50 area that occurs before reaching its overhead resistance trendline is a purchasable pullback. That purchase can then be sold around the $63 area.

Based on the above bullish items noted, let’s review a shorter-term chart to determine a less risky entry point than the current share price. I also want to see if I can identify a Bullish Impulse wave pattern in its current uptrend.

SAVE – Bullish Impulse Wave Pattern

I’ve switched to a daily candlestick chart to try and figure out specific support areas, as well as see if I can identify a Bullish Impulse wave pattern.

When looking for an Impulse wave pattern, whether it is bullish or bearish, start by counting the number of waves that you see. An Impulse wave pattern usually has either 3 or 5 identifiable uptrend waves. On rare occasions, it can have 8 waves. Refer to this link where I illustrate a “standard” Impulse wave pattern with 3 uptrend waves.

SAVE cannot be forming a standard Impulse wave pattern though. According to this next 3 month daily candlestick chart, I count 4 uptrend waves so far. I am expecting a 5th wave. Wave 1 is the first uptrend wave. Wave 3 contains 3 uptrend waves since it is an extended wave. Wave 5 would be the 5th uptrend wave.

Analyzing a Potential Impulse Wave Pattern In Development on SAVE’s Daily Chart

If the above illustration is properly marked and my intuition is correct, scaling into a position in SAVE on a pullback to the $52.50 area could be a decent opportunity to go long the stock.

SAVE – Trendlines & Fibonacci Extension Tools

This is the same 1 year daily candlestick chart. I left the Fibonacci Extension Tool from the first chart above on SAVE’s daily chart. I then added another Fibonacci Extension Tool specific to the current, short-term uptrend. The purpose of multiple Fibonacci Extension Tools is to look for confluence areas and possible trade set-ups.

Analyzing SAVE’s Daily Chart Using Trendlines & Fibonacci Extension Tools

The bearish divergence setting up is when buying momentum starts to slow yet the share price still reaches higher. This tells you the trend is getting a little tired and may need to consolidate soon. The alternating red and green candlesticks the last couple of trading days seem to confirm a consolidation is near which would be considered the top of Wave 3. The pullback area for Wave 4 is the Wave 4 within an extended Wave 3, or the $52.50 area. This should be the same consolidation area after Wave 5 completes.

Therefore, if you do buy shares and go long on SAVE around the $52.50 area and miss trimming shares at the top, you share price should be relatively safe during the pullback after Wave 5 completes. You would be taking what they call a “round-trip”, but the share price should not dip below the $52.50 area much during its longer consolidation. The Falling Window candlestick resistance area should be a second line of defense/support in case of a further pullback. Remember, once a resistance area is broken, that area usually turns into a support area.

SAVE – Summary

If oil is truly going to be lower for longer, the airline industry should see benefits in the form of higher margins. Spirit Airlines (SAVE) is one of the leaders in squeezing margins. Since its current uptrend is flashing some consolidation signs, it is probably best to wait to go long on SAVE until its share price pulls back towards the $52.50 area. Any purchases made there should have upside potential to the $63 area, or so. Any shares sold around the $63 level should then be repurchased back around the $52.50 area. Wash, rinse, repeat.

After the repurchase of shares at the $52.50 area, SAVE’s share price should reach higher and most likely break through its overhead resistance trendline. While I don’t usually like to guess at the reasons for pullbacks, I will muster an attempt here – the oil production cuts agreed to by OPEC will be the cause. While the agreement to cut production sounds good, it usually never happens by all participating countries.