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​​​​​​Airlines gain momentum as flight plans boost easyJet and IAG shares​​​​​​

Gains for easyJet after announcing plans to reopen flights in June. Could the heavily hit travel sector start to play catch-up?

Airline shares take off

Airline stocks are on the rise today, with traders jumping into a sector that has been hit hard throughout the this coronavirus crisis.

Doubts over the long-term outlook for the sector remain, with demand for air travel likely to remain depleted until we see a cure or vaccine to eradicate health fears.

Nevertheless, while huge questions remain, easyJet's plan to resume flights on 15 June provides a boost to sentiment. While those flights will initially just cover a select number of airports, there is a feeling that this could be the beginning of a long recovery for the sector.

Importantly, the threat of losing the middle seat revenues has been allayed, with easyJet deciding to simply use the middle seat instead.

Elsewhere, Dart Group have seen a huge 33% rise over the course of this week, with markets emboldened by a £170 million funding round undertaken this week.

That funding could be key to securing the long-term future of the company, thus raising confidence for investors. The chart below highlights the relative rotation (RRG) of the FTSE 100.

We can see that the likes of easyJet and IAG are two of the worst stocks in terms of relative performance (X axis) over the past week (each point represents a day).

easyJet shares set to fly out of ‘lagging’ category

However, both are seeing a shift in terms of momentum, with easyJet in particular looking set to cross out of the ‘Lagging’ category, and into ‘Improving’. This could perhaps signify an impending period of strength for these stocks relative to the wider FTSE 100 index.

From a charting perspective, easyJet shares are on the rise within a consolidation zone that has been dominating since the mid-March lows of £4.10.

That points towards a possible rally towards the £6.87 region of resistance once more. Whether this represents the base for an ultimately recovery in easyJet remains to be seen.

After all, if the market sees another radical decline, its likely that those stocks hardest hit would come back into the firing line once more. Nevertheless, with momentum starting to shift, this rebound could bring about a possible rise towards resistance (22% increase).

Dart Group has been on the rise over the course of the week, bringing the stock closer to the £7.27-£7.49 region of resistance. That has been well respected in the past, and thus it represents a major hurdle.

Should we break through that region of resistance it could provide a signal that the market has bottomed out. Until then, further upside looks likely as we move into this crucial area of resistance.

IAG looking set for substantial rebound

IAG is the one airline of the trio which took a secondary hit following the mid-March lows.

However, we are starting to see a substantial rebound, with the stock rising 17% this week. Much like easyJet, the April peak remains some way from the current price level. The recent respect of £1.92 today also points towards further upside from here, as we see the stock build on previous levels of support.

There is a chance that this rebound is a precursor to further downside, yet momentum seems to point towards further upside over the near term.

This information has been prepared by IG, a trading name of IG Australia Pty Ltd. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.

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