Southwest Airlines (LUV) Surges 3.73% on Bullish Technicals, Targets $45.02 Resistance

Southwest Airlines (LUV) has surged 3.73% in the most recent session, extending a five-day upward trend with a cumulative gain of 7.80%. This rally suggests a short-term bullish momentum, supported by rising volume and a narrowing range of volatility. The price action indicates a potential breakout from a consolidation phase, with key resistance levels likely forming near the recent high of $45.02 and support near the $42.44 level, as evidenced by prior price reactions.

Candlestick Theory

The recent bullish candlestick patterns, including a strong white candle on the final trading day and a series of higher closes, suggest continuation of the uptrend. The formation of a "Bullish Engulfing" pattern near the $42.44 level in mid-January provided an early signal of a reversal from a downtrend. Current price action shows a lack of bearish shadows, indicating strong buying pressure. Key support levels at $42.44 and $41.33 (prior lows) and resistance at $45.02 (recent high) are critical for trend validation.

Moving Average Theory

The 50-day moving average (currently ~$36.50) is significantly below the 200-day average (~$33.20), indicating a long-term bullish bias. The 10-day MA (~$44.00) crossing above the 50-day MA in early January confirmed a short-term uptrend. The price has remained above the 200-day MA for the past month, suggesting a sustained bullish phase. However, the 50-day MA’s upward slope may delay a potential bearish crossover if the rally stalls.

MACD & KDJ Indicators

The MACD histogram has turned positive in recent sessions, with the line crossing above the signal line, reinforcing the bullish momentum. The KDJ oscillator shows the stochastic %K line above %D, with a reading of 75, indicating overbought conditions but no immediate reversal signal. Divergence between the RSI and KDJ is minimal, suggesting alignment in momentum.

Bollinger Bands

The price has recently tested the upper Bollinger Band (~$45.02), signaling overbought territory. The 20-period standard deviation has expanded, reflecting increased volatility. A pullback to the mid-band (~$43.00) would likely find support, with a potential continuation above the upper band signaling a new bullish phase.

Volume-Price Relationship

Trading volume has surged alongside the recent gains, with the most recent session’s volume (12.3 million shares) exceeding the 30-day average. This validates the strength of the rally. However, a divergence between volume and price could emerge if volume contracts during a pullback, signaling weakening momentum.

Relative Strength Index (RSI)

The 14-period RSI stands at ~72, indicating overbought conditions. While this does not guarantee a reversal, it suggests caution for further upward moves. A close below 60 would signal a potential correction, with the 50-level (~$37.00) acting as a near-term psychological barrier.

Fibonacci Retracement

Applying Fibonacci levels to the recent $41.33–$45.02 range, the 38.2% retracement level (~$43.60) has already been tested as support. A breakdown below the 23.6% level (~$42.70) would target the $42.44 key support. Conversely, a break above $45.02 would aim for the 127% extension (~$47.00).

Confluence and Divergences

The alignment of bullish momentum across MACD, moving averages, and volume supports the continuation of the uptrend. However, the overbought RSI and proximity to the upper Bollinger Band introduce caution. A pullback to the 38.2% Fibonacci level would likely see a retest of bullish conviction.