Southwest Airlines [S&P 500; United States] weakens below Exponential Moving Average Price (EMAP); 12-day EMAP trails 26-day EMAP November 16, 2011

STOCKS

Southwest Airlines (LUV.N) has dropped below its trend. The MACD indicator (12 day EMA-26 day EMA) is negative, a bearish signal. The stock price decreased 15.0c (or 1.8%) to close at US$8.05. Compared with the Dow Jones Industrials index, which fell 190.6 points (or 1.6%) on the day, this was a relative price change of -0.2%.

TECHNICAL ANALYSIS

Price Change % 1-day 1-month 1-year LUV -1.83% -6.5% -39.47% Airlines -1.61% -3.76% -30.5% DJIA -1.58% 2.24% 8%

Downtrend

Spotting the top or distribution: the price was down on higher volume today. There have been five such events of Distribution in the last three weeks. Combined with the fact that the last price of US$8.05 was lower than today's mid-bounce price [average of price high and price low] of 8.2 is a bearish signal.

Support: the support price is hovering at the US$8.04 level. Volume traded at the support price zone was 1.9 times average during the six occasions when the support price was breached. In the last month the lowest price was US$8.04 on Nov 16. The second lowest was US$8.07 on Nov 10, the third lowest was US$8.08 on Nov 14, the 4th at US$8.09 on Nov 15 and the 5th at US$8.135 on Nov 09.

Resistance: previous rallies have been met with firm resistance at US$9.28. Volume was 2.9 times average during the three occasions when the resistance price was breached in the last one month. In the last one month the highest was at US$9.28 on Oct 20, the second highest at US$9.23 on Oct 21. The third advance halted at US$9.18 on Oct 24.

Falls to Rises: In the last three months the number of falls outnumbered rises 32:30 or 1.07:1.

Trailing month: in the last 21 trading sessions there has been a net decline of 7.58%; the stock has retreated 14 times and the biggest one day decline was 3.8% on Oct 25.

PRICE VOLUME DYNAMICS

Volatility: the stock traded between a one-month low of US$8.04 and two-day high of US$8.25, suggesting a trading opportunity between peaks and troughs. The average daily volatility of 2.8% places the stock in the 3rd quartile in the market meaning it is mildly volatile.

Volume: there were 7,410,085 shares worth US$59.7 million traded. The volume was 0.8 times average trading of 3,693,920 shares.

% Discount to high: the last price is at a discount of 41.5% to the 12-month high of US$13.77 a year ago on 24 Nov, 2010.

% Premium to low: the last price is at a premium of 12.6% to the 12-month low of US$7.15 two months ago on 04 Oct, 2011.

Volume weighted price (VWP): the price is at a discount of 6.2% to the 1-month volume weighted average price of US$8.58, which may appeal as a value proposition.

Beta: The Beta of this stock is 1.19. A Beta greater than 1 suggests this is a high risk, high return stock with volatility greater than that of the market.

Standard Deviation (SD): SD is a statistical measure of deviation from the mean. The SD of 2.1% gives it a percentile rank of 34 meaning that 34% of stocks in the global market are less volatile than this stock.

OPEN INTEREST TREND AND INTERPRETATION

Open interest hit a six-day high.

Same day trend: open interest rose for a fifth consecutive day. Open interest strengthened 0.5% from 40,316 to 40,501. Combined with the price falling 1.8% this suggests the market is weak.

Trailing one week trend: open interest rose, ending a two-week streak of losses. Open interest added 2.9% from 39,361 a week ago while the stock dipped 0.7% from US$8.17 a week ago. Combined with the decrease of price this also suggests the market is weak.

Trailing one month trend: open interest crashed 24.4% from 53,607 a month ago while the stock slumped 6.5% from US$8.61 a month ago. Combined with the falling price this suggests the market is strengthening.

Open interest as % of issued capital: 4,050,100 shares, representing 0.5% of the issued capital.

[ranked 1219 out of 1653 stocks in descending order]

Put:call ratio: open interest contracts on exchange traded options included 13,184 put contracts and 27,317 call contracts.

The put:call ratio was 0.5, up 1.3% for the day, up 5.7% in the past week and up 18.4% in the past month.

Top three traded call options [volume of contracts in brackets; 1 contract is 100 shares]

Exercise US$8.0; Expires Nov 19: 23.0c down 17.9% [64]

Exercise US$8.0; Expires Dec 17: 35.0c down 22.2% [36]

Exercise US$9.0; Expires Dec 17: 8.0c down 20.0% [6]

Top traded put options [volume of contracts in brackets; 1 contract is 100 shares]

Exercise US$8.0; Expires Mar 17: 70.0c up 7.7% [50]

Access comprehensive Stock Research on http://www.buysellsignals.com/20211186

PRICE PERFORMANCE RANK IN SECTORS

The stock is in 2 sectors.

The following index and sectors fell setting the trend for its fall of 1.8%:

Airlines sector of 33 stocks traded today, which was down 95.1 points or 1.6% to 5,828.8;

Dow Jones Industrials index of 30 stocks traded today, which was down 190.6 points or 1.6% to 11,905.6;

The index of Top 5000 stocks by MCap, which was down 101.4 points or 1.2% to 8,250.6

Percentile Rank 1-day 1-month 6-months LUV 32 19 12 Airlines 32 32 29 DJIA 33 63 70

RELATIVE VALUATION INDICATORS [RVI] FUNDAMENTAL ANALYSIS

The stock meets the following value criteria set by Benjamin Graham:

-"An earnings-to-price yield of at least twice the triple-A bond"; the stock's earning yield of 7.3% is 3.55 times the triple-A bond yield of 2.1%.

The stock has a score of 6 out of 9 set by Joseph Piotroski [pass mark >=5 ]:

Positive net income; Positive operating cashflow; Return on assets improvement [from 0.7% to 3.0%]; Good quality of earnings [operating cashflow exceeds net income]; Improvement in current ratio from 1.25% to 1.29%; Improvement in asset turnover [growth in revenue of 16.95% exceeded growth in assets of 8.37%].

Other Bullish Signals:

- The Price to Book of 1.0 lower than average of 1.9 for the Airlines sector and 1.9 in the global market of top 5000 stocks by MCap. We estimate the shares are trading at a current year Price to Book of 0.9 and a forward year Price to Book of 0.8.

- Return on Assets of 3.0% versus sector average of 2.3% and market average of 1.7%.

- Return on Capital Employed of 7.5% versus sector average of 5.9% and market average of 10.8%.

- The P/E of 13.6 multiplied by the P/NTA of 1.0 is 13.6. Being less than the Benjamin Graham benchmark of 22.5 the stock appears undervalued.

- The company is cash rich with Cash to Market Capitalisation at 20.1%.

Bearish Signals:

- Price/Earnings of 13.6 versus sector average of 11.1 and market average of 13.5. We estimate the shares are trading at a current year P/E of 9.5 and a forward year P/E of 6.6.

- Price/Sales of 0.52 versus sector average of 0.4 and market average of 1.0. We estimate the shares are trading at a current year Price/Sales of 0.4 and a forward year Price/Sales of 0.3.

- Return on Equity of 7.4% versus sector average of 9.6% and market average of 10.5%.

- Total Liabilities/ EBITDA of 6.0 is more than or equal to 5, this compares unfavourably with Joseph Piotroski benchmark of 5.

- Dividend Yield of 0.2% (based on trailing 12 months dividends of 1.80c) versus sector average of 1.4% and market average of 2.2%. The company paid out a dividend of 1.80c in the past 12 months. The 10-year bond yield is currently 2.1%.

RELATIVE VALUATION INDICATORS [RVI] TECHNICAL ANALYSIS

Bullish Signals:

- the Relative Strength Index (RSI) of 21.0 has breached the oversold line of 30.

Bearish Signals:

- The price dipped 0.7% in the last week and slumped 6.5% in the last month.

- In the global market of top 5000 stocks by MCap, the stock has a 6-month relative strength of 12 indicating it is trailing 88.0% of its global peers.

- The price to 50-day EMAP ratio is 0.95, a bearish indicator. In the past 200 days this ratio has been under 0.95 17 times suggesting further downside. The 50-day EMAP has decreased to US$8.518. A decrease is another bearish indicator.

- The Moving Average Convergence Divergence (MACD) indicator of 12-day Exponential Moving Average (EMA) minus the 26-day EMA is negative suggesting a bearish signal. Both the 12-day EMA as well as the 26-day EMA are falling, another bearish signal.

- In the last three months the stock has hit a new 52-week low seven times, pointing to a significant downtrend.

- In the past 200 days this ratio has been under 0.77 45 times suggesting further downside. The stock is trading below both its MAPs and the 50-day MAP of US$8.381 is lower than the 200-day MAP of US$10.42, a bearish indicator. The 200-day MAP has decreased to US$10.42. A decrease is another bearish indicator.

- The price to 200-day MAP ratio is 0.77, a bearish indicator.

Breakdown:

- The stock traded at a one-month low of US$8.04 today.

- In the last three months the stock has hit a new 52-week low seven times, pointing to a significant downtrend.

SHAREHOLER RETURNS

Trailing one week: the stock fell three times (60% of the time) and rose twice (40% of the time). The volume was 0.8 times average trading of 18,469,600 shares. The value of US$1,000 invested a week ago is US$950 [vs USD1,011 for the Dow Jones Industrials index], for a capital loss of US$50 (or loss of 5.0%).

Trailing one month: the stock fell thirteen times (57% of the time), rose nine times (39% of the time) and was unchanged once (4% of the time). The volume was 0.97 times average trading of 81,266,240 shares. The value of US$1,000 invested a month ago is US$935 [vs USD1,025 for the Dow Jones Industrials index], for a capital loss of US$65 (or loss of 6.5%).

Trailing one year: the value of US$1,000 invested one year ago is US$606 [vs USD1,109 for the Dow Jones Industrials index], including a capital loss of US$395 and dividend reinvested of 91c. The total return to shareholders for 1 year is -39.4%.

Trailing five years: the value of US$1,000 invested five years ago is US$510, including a capital loss of US$491 and dividend reinvested of 98c.

The present value of US$1000 invested at a previous date is shown below:

PV1000 1-week 1-month 1-year LUV Stock 950 935 606 Airlines USD978 USD962 USD702 DJIA USD1,011 USD1,025 USD1,109

FINANCIALS

Quarterly Report released on August 09, 2011; year-on-year comparisons with previous corresponding period:

In the quarter to June 30, 2011 total revenue was up 30.5% to US$4.1 billion; net profit growth 43.8% to US$161 million; EPS of 21.0c.

Annual Report for the year ended December 31, 2010 (year-on-year comparisons with previous corresponding period)-

EPS of 61.0 U.S. cents.

Favourable Changes: a track record of profits in 4 of the last 4 years; total liabilities to EBITDA down 34.4% to 6.0. While this compares unfavourably with the Joseph Piotroski benchmark of <5, the trend is favourable; although the Total Liabilities to Operating Cash Flow ratio of 5.9 also compares unfavourably with the Joseph Piotroski benchmark of <4, it had improved by 34.0% from the previous year.; total liabilities to total assets down 3.2% to 0.6; current ratio up 3.2% to 1.3; Net tangible assets per share up 13.6% to $US8.36; Working capital to total assets up 35.6% to 6.3%; Retained earnings to total assets up 0.2% to 34.9%; Sales to total assets up 6.8% to 0.8.

Major Common Size Ratios: total current assets to total assets up from 23.5% to 27.7%; short-term investments to total assets up from 10.4% to 14.7%; fixed assets to total assets up from 13.5% to 13.7%; cash to total assets up from 7.8% to 8.2%; other non-current assets to total assets up from 1.9% to 3.9%; EBITDA to Sales up from 9.3% to 12.7%; EBIT to Sales up from 3.4% to 7.5%; profit before tax to sales up from 1.6% to 6.2%; depreciation to sales down from 6.0% to 5.2%; profit after tax to sales up from 1.0% to 3.8%.

MARKET SHARE

Southwest Airlines vs Airlines sector [Airlines sector Total in Brackets]

Net Profit of US$459 million [4.5% of aggregate sector net profit of US$10.1 billion; up from -2.0% in the previous year.]

EBIT of US$912 million [5.4% of aggregate sector EBIT of US$17 billion; down from 11.6% in the previous year.]

ISSUED CAPITAL

Based on 778,522,000 issued shares the market capitalisation is US$6.3 billion. It is the world's largest Airlines company by market capitalisation.

ACTIVITIES

It is the world's 12th largest Airlines company by assets.

Southwest Airlines Co. (Southwest) is a passenger airline that provides scheduled air transportation in the United States. As of December 31, 2008, the Company operated 537 Boeing 737 aircraft and provided service to 64 cities in 32 states throughout the United States. The Company focuses principally on point-to-point service, rather than hub-and-spoke service. Approximately 78% of the Company's customers fly non-stop. Southwest predominantly serves short-haul routes with high frequencies. It complements this service with more medium to long-haul routes, including transcontinental service.

TOP MANAGEMENT

The chief executive officer and chairman is Gary C. Kelly and the chief financial officer is Laura H. Wright.

BUSINESS NEWS ROUND UP

The last 5 snippets are:

November 13: Southwest Airlines and AirTran Airways Announce Summer Flight Schedules

[News Story] http://www.nasdaq.com/aspx/companynewsStoryPrint.aspxstoryid=201111131300pr_news_usprx____da05460 Source: NASDAQ Stock Exchange

October 07: Southwest Airlines Launches Nationwide Fare Sale For Holiday Travel

[News Story] DALLAS, Oct. 7, 2011 /PRNewswire/ -- It's time to plan your winter vacation because Southwest Airlines (NYSE: LUV) has lowered its fares! The airline announced today a holiday sale; offering Customers air fares starting as low as $59 one-way to select destinations nationwide (see fare rules below).

September 22: Southwest Airlines Executives Assume New Roles

[News Story]Southwest Airlines (NYSE: LUV) today announced several executive changes at the Company.Bob Jordan, Southwest's current Executive Vice President Strategy & Planning, has been promoted to Executive Vice President & Chief Commercial Officer, and he maintains his role as President of AirTran Airways.

September 08: Southwest Airlines Co. to Present at the 2011 Deutsche Bank Aviation and Transportation Conference

[News Story]Southwest Airlines Co. (NYSE: LUV) has been invited to speak at the 2011 Deutsche Bank Aviation and Transportation Conference. Deutsche Bank will be webcasting the audio presentation live, and a link to the webcast will be made available via the Investor Relations homepage on the Southwest Airlines website.

September 05: Southwest Airlines Expands Atlanta Service With Two New Nonstop Destinations

[News Story] DALLAS, Sept. 5, 2011 /PRNewswire/ -- Southwest Airlines (NYSE: LUV) announced today that the carrier is expanding its service plan for Hartsfield-Jackson Atlanta International Airport next year with two additional nonstop destinations, Las Vegas and Phoenix. For sale today, the carrier will add daily, roundtrip flights between Atlanta and Las Vegas and Atlanta and Phoenix for travel beginning March 10, 2012.On Aug.

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