Southwest Airlines (LUV) is at a crucial point that may influence its future market performance. Since April, the airline has followed a reliable upward trend, which has supported rising prices. In July, LUV hit a resistance zone between $37 and $38, but faced significant selling pressure. This led to a quick drop and created a noticeable gap on its chart. Right now, LUV is trading at around $33.40 and is testing a vital support level again. If buyers step in at this point, there’s a chance to fill the gap and return to the $37-38 zone, which could mean a 10-12% increase from its current price. Buyers hope to see the stock consolidate above this level, indicating strength and the potential for new highs. On the other hand, if the stock breaks the trendline decisively, it would end the five-month uptrend and could lead to falling prices. Traders should closely watch how the stock behaves around this trendline. A bounce back with higher trading volume could be a buy signal, while a drop below might suggest a sell opportunity. The current situation calls for patience—wait for the stock to show its direction instead of trying to guess. Southwest Airlines is at a make-or-break point. It’s positioned right on an important upward trendline at around $33.40. This trendline has supported the stock since late April, making this a critical moment. How the stock reacts in the coming days is likely to influence its performance for the rest of the year. For those optimistic about the stock, a bounce from this level creates a pathway to close the price gap left by strong selling in July, aiming for the $37-38 resistance zone, which could result in gains of over 10%. A good strategy would be to consider buying call options for November or December, which would allow enough time for the trade to develop if buyers come in. The bullish case is backed by recent TSA data from the third quarter, showing that passenger numbers are about 5% ahead of the same time in 2019. This suggests that travel demand is strong, despite some economic challenges. This underlying demand could help buyers maintain this important support level. However, if the support line fails, the outlook could worsen quickly. A clear close below this trendline would deny the five-month uptrend and might lead to deeper declines. In this case, purchasing November put options with a strike price around $33 or lower could be a strategic move. This bearish outlook is supported by ongoing cost pressures highlighted in the latest earnings report. WTI crude oil prices remain high, around $85-90 per barrel, squeezing airline profit margins. This situation might give sellers the reason they need to push the stock below its long-term support. The plan now is to wait for confirmation rather than make assumptions at this turning point. Look for a strong bounce with increased volume before buying calls, or a clear drop and close below the trendline to start bearish positions with puts. Patience is crucial, as acting too soon could lead to being caught off guard.

here to set up a live account on VT Markets now