Interactive Investor

Are IAG shares set to soar?

Airlines will take years to recover to full health, but investors might be able to benefit as they do.

28th April 2021 08:43

Alistair Strang from Trends and Targets

Airlines will take years to recover to full health, but investors might be able to benefit as they do.

International Consolidated Airlines Group SA, AKA British Airways

The airline industry believes it will be many, many years until it can return to its prior passenger levels following the pandemic. This degree of hesitation is illustrated with the share price movements of IAG (LSE:IAG).

Since breaking through its immediate downtrend back in March this year, any optimism which looked forward to a rise was dashed pretty swiftly, the share price opting to flounder around aimlessly for a couple of months.

Worse, not only has it not gone up, the price managed to fall below the level of trend break and this is rarely a good sign. Instead, it tends to indicate that any historical trend shall be ignored until such time a good reason not to ignore it appears. With IAG, there's been a solid fascination with the 200p trend break level. This level has been fouling things up since Covid-19 hit last year.

Presently trading around 203p, the share price needs to better 224p to allow hope for the future, as we can calculate the potential of this triggering recovery to an initial 261p. If exceeded, we can even propose a longer-term attraction lurking at 350p, and, with prior movement history, we suspect some hesitation at such a level.

There is a caveat we should mention, one which may prove important. If the market discovers reason to ‘gap’ the IAG share price upward by around 40p, for whatever excuse, we shall take this as a signal the market intends the share price to start a strong recovery process.

In such a scenario, we can suggest a big picture longer-term ambition awaiting from 578p. Absolutely nothing suggests this scenario at present, but there are quite a few airline industry shares which will require kick-starting to get them moving properly.

As always, we can present a converse scenario as the price needs break below the red line on the chart, currently 183p, to justify concern. This would trigger a descent to an initial 153p with our longer-term secondary, if broken, working out at 107p and hopefully a proper bounce.

Source: Trends and Targets. Past performance is not a guide to future performance

Alistair Strang has led high-profile and 'top secret' software projects since the late 1970s and won the original John Logie Baird Award for inventors and innovators. After the financial crash, he wanted to know 'how it worked' with a view to mimicking existing trading formulas and predicting what was coming next. His results speak for themselves as he continually refines the methodology.

Alistair Strang is a freelance contributor and not a direct employee of Interactive Investor. All correspondence is with Alistair Strang, who for these purposes is deemed a third-party supplier. Buying, selling and investing in shares is not without risk. Market and company movement will affect your performance and you may get back less than you invest. Neither Alistair Strang or Interactive Investor will be responsible for any losses that may be incurred as a result of following a trading idea.

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