Is Flight Centre now staging a rally?

Flight Centre (FLT) is a stock that divides the analyst community. On the one hand, we have concerns that FLT’s problems are structural and that it will struggle to compete with the more established online agencies. On the other we have a view that pricing issues have been cyclical and that too much pessimism is priced in. This leads to price targets varying from $25 all the way up to $36.

With the share price right in the middle of those targets, will FLT trade lower or higher? When we look at the chart, it seems as though the bulls have it for now and FLT should trade higher. Since November, FLT has been trending lower. However, notice that the range has been tightening on the way down. This formation is known as a “falling wedge”. If a stock can break out of that and move against the trend, then this indicates a reversal is in place. In this case, the wedge was trending down, but FLT has now broken out of that and is trading higher. This implies that for the time being at least, we should expect to see further upside for FLT. When looking for initial targets, you tend to get resistance near the base of the wedge. In this case, that is near $34. 

Michael Gable is managing director of Fairmont Equities. Any advice is general only. Fairmont Equities uniquely combines both fundamental and technical analysis. Visit www.fairmontequities.com to access our free blog and educational videos.