I Have A Great Pair Trade

Yesterday in The PPT, in the blog section, I highlighted how super-extended the hybrid scores were and to take profits. Because of that, I was able to sell ECR above $7.10 and then swing those funds around into AAL.

This is a very simple trade, even an idiot can do it.

AAL is the most leveraged to oil going down in the airline space. Them and ALGT have the most to gain from cheaper crude. Naturally, if crude spikes, there will be weakness in the shares. Nonetheless, this is a very healthy business, with over $11 billion in quarterly revenues and nearly a billion in net profits.

Here is how Exodus is grading the airline sector now.

Even after today’s move, the sector is still trading near the bottom end of its Hybrid (combination of both fundamental and technical factors) range. AAL is still down 6% for the year, unjustly, and stand to profit most from the rout in oil.

The pair trade is this:

Long SLCA/Long AAL.

Both are heavily leveraged in their own right and possess the ability to spit out significant free cash flow.

Greece is the story this evening and futures are off. We know how this ends, with Greece blinking, bears caught in ‘fag-boxes‘, tossed idly into outerspace.