Delta Pops, Oil Drops, Will It Stop? How to Trade Airline Stocks and ETFs Now.

We knew this could happen, and that it probably would happen. A sharp reversal in oil (CLK26) prices, due to something short of the destruction of a civilization. And then, corporate earnings continued on Wednesday morning, just hours after a two-week ceasefire between the U.S. and Iran was reached. 

Delta Airlines (DAL) reported its results. And the travel sector finally found its tailwind. DAL popped by more than 10% Wednesday morning, following a triple-threat of positive catalysts: a dominant first-quarter earnings beat, robust forward guidance, and a timely cooling of tensions in the Strait of Hormuz.

DAL did this. Focus on the spike at the very right side of the chart. It was a big enough move to stand out on this chart of 2-year, daily prices for the stock.

That happened in part because oil prices, reflected through the US Brent Oil ETF (BNO), did this. Again, find that big dropoff, far right side of the chart. Of note, the PPO indicator at bottom has been hinting at a bigger possibility of this for more than a week.

Which is why the leveraged inverse oil price ETF I highlighted here very recently found a temporary bottom. At least, that’s what I’m considering it to be, given that the 20-day moving average has not really budged. Note that this highlights one of the negative features of these leveraged ETFs. A massive reversal overnight does not always translate to a -2x move. In this case it was more like -0.5x, since USO gained about 11% as of early afternoon Wednesday.

For the tactical investor, this isn’t just a story about a single airline.  Because Delta is held by over 300 different ETFs, this single-stock breakout is acting as high-octane fuel for several specialized baskets. For how long? We’ll see. But this seems a good time to acknowledge, to paraphrase the pitch flight attendants often give, “you have many choices when you fly.” Here are some that airline bulls can use to get a basket of stocks to diversify their interests.

The most direct beneficiary of this move is the US Global Jets ETF (JETS). With a massive allocation to DAL approaching 12%, JETS is the primary vehicle for those who want to play the airline recovery without picking individual winners.

Delta’s performance is significant because it proves that the consumer is still prioritizing experiences over things. That’s despite the high-interest-rate environment. By delivering strong cash flow and maintaining its premium brand positioning, DAL could pull the entire JETS index higher, effectively lifting its competitors like United and American in a rising tide-style move.

The Multi-Sector Ripple Effect

The Delta pop is also bleeding into broader transportation and value-focused funds, proving that the carrier is now a cornerstone of the domestic industrial recovery.

The iShares U.S. Transportation ETF (IYT) and the First Trust Nasdaq Transportation ETF (FTXR) both carry significant Delta weightings. 

When the airlines move, it usually signals an uptick in broader business travel and logistics activity. We might have a K-shaped economy, but the upper part of that K is still making travel plans. 

The Energy Safety Valve

Perhaps the most critical part of the Delta narrative is those potentially cooling oil prices. Airlines are essentially short bets on oil. Fuel is the largest variable cost for airline companies. So, the overnight easing of tensions in the Middle East has provided a massive margin expansion narrative for Delta. 

Rob Isbitts created the ROAR Score, based on his 40+ years of technical analysis experience. ROAR helps DIY investors manage risk and create their own portfolios. For Rob's written research, check out ETFYourself.com.