Southwest Airlines Shares Surge 3.33% as Technical Indicators Signal Uptrend Continuation Toward $54.698

Southwest Airlines (LUV) has surged 3.33% in its most recent session, closing at $54.26, marking a significant breakout above prior resistance levels. This move aligns with a broader uptrend, as the stock has oscillated between $30 and $54 over the past year, with key support levels identified at $32.80 (a former 50-day moving average) and $37.50 (a prior swing low). Resistance appears to have shifted to $49.12 (January 29 high) and $52.765 (February 4 high), with the recent close breaching the latter, suggesting a potential extension toward $54.698 (February 6 high).

Candlestick Theory

The recent bullish momentum is underscored by a series of strong white candles, particularly from January 29 to February 6, where the stock surged over 18% in one session and maintained gains despite a pullback to $47.52 on January 30. A potential "Bullish Abandoned Baby" pattern formed around January 29–30, indicating a reversal from bearish to bullish sentiment. Key support levels at $42.50 (February 3 low) and $39.85 (December 19 high) have held multiple times, while resistance at $52.97 (February 5 high) was decisively overcome.

Moving Average Theory

The 50-day moving average (approximately $43.50) and 200-day moving average ($36.00) are both bullish crossovers, with the stock trading above both. The 100-day moving average ($41.00) acts as a dynamic support. The 50-day/200-day "Golden Cross" in late January has reinforced the long-term uptrend. However, the 50-day MA is now approaching the 200-day MA, suggesting a potential consolidation phase unless the 50-day continues to outperform.

MACD & KDJ Indicators

The MACD histogram has turned positive in recent sessions, with the MACD line crossing above the signal line on January 29, confirming bullish momentum. The KDJ oscillator (stochastic) shows overbought conditions (K=85, D=75), but the recent surge has kept the K line above D, suggesting sustained buying pressure. Divergence between the KDJ and price action, however, has not been observed, indicating no immediate bearish reversal signal.

Bollinger Bands

Volatility has expanded as the stock moved from a narrow $47.30–$49.85 range in early January to a wider $51.88–$54.698 range in late January and February. The price has remained near the upper Bollinger Band for three consecutive sessions, indicating strong momentum. A potential contraction in volatility is expected as the stock consolidates, which could precede a breakout above $54.698.

Volume-Price Relationship

Trading volume has spiked during key uplegs, including a 3.33% gain on February 6 with $800.9 million in volume (vs. $409.9 million on the prior day’s 0.15% decline). This "volume confirmation" validates the recent price surge. However, volume has not yet exceeded the record $1.629 billion session on January 29, suggesting retail participation may still be a wildcard.

RSI

The 14-day RSI is currently in overbought territory (>70), a function of the 18.7% rally on January 29 and subsequent gains. While this typically warns of a pullback, the RSI has not yet formed a bearish divergence (price highs above prior highs while RSI peaks lower). A close below $51.88 (February 5 low) would trigger a retest of the 30–35 RSI oversold zone, but the current trajectory suggests the uptrend remains intact.

Fibonacci Retracement

Drawing a retracement from the January 29 high ($49.12) to the January 28 low ($40.68) shows critical levels: 23.6% at $46.30, 38.2% at $44.80, and 61.8% at $43.20. The stock has already surpassed the 23.6% and 38.2% retracements, with the 61.8% level now acting as a potential support. A breakdown below $43.20 could trigger a retest of the $37.50–$32.80 base.

Confluence and Divergences

The strongest confluence occurs at $43.20–$44.80, where the 61.8% Fibonacci retracement, 100-day moving average, and prior swing lows converge. This area would need to hold to confirm the uptrend. A divergence between RSI and price action (e.g., lower RSI highs despite higher price highs) would signal weakening momentum, but this has not yet materialized.

The stock’s trajectory suggests a high-probability continuation of the uptrend, supported by bullish momentum indicators and strong volume. However, a pullback to test the $43.20–$44.80 confluence zone is statistically likely, with outcomes depending on whether institutional buyers step in to defend these levels. A breakdown below $43.20 would increase bearish probabilities, while a sustained close above $54.698 could target $57.00–$60.00 (projected from the January 29–February 6 move).

Caveats

- Overbought RSI does not guarantee a reversal, as strong fundamentals or macroeconomic factors (e.g., fuel prices) could extend the rally.
- Divergences in KDJ or MACD would require closer monitoring for potential trend exhaustion.
- The recent volume spikes indicate aggressive buying but could normalize as the stock consolidates, reducing upside potential.