IAG break higher

At Tricio we look at charts in order to gauge investor sentiment and behaviour.

The long-term chart of International Airlines Group (or International Consolidated Airlines Group or British Airways/Iberia to you and me…)  shows that optimism for this airline’s future is bumping to near all-time high levels. The falling green resistance trendline from the 1997 and 2018 peaks is giving way near 470p. Simple extension targets point towards 880p/900p potential, with bigger measures pointing towards 2,500p. Fly me to the moon indeed.

There are plenty of reasons for optimism. The US war in Iran seems to be over. Oil prices are down and may fall further, along with refined product costs over time. Business travel is back and the ‘K-shaped economy’ narrative is ok for BA given their reliance on US/European and global business travel. Traffic in the Middle East should recover over time as well. The US economy is doing better than expected, and European economic activity is holding up. The UK is limping along but the outlook may be improving as energy costs ease etc. EasyJet, the subject of takeover speculation when the airline industry was under pressure from the war a few months ago (and after a few profit warnings), has accepted a much improved offer that has seen the share price climb sharply. What could possibly go wrong for IAG? 

The problem with big upside chart projections is human nature of course. We love to be optimistic – lotteries are won every day and you have to be in it to win it. But old IAG trading hands (or BA before this) have been raised on the notion of trading the range for a very, very long time. Fund managers are usually not paid to shoot the lights out, but they do get rewarded for outperforming benchmarks. If they believe that the share price will swoon from current pushes above 480p, as it has in the past, then they may be tempted to lighten up a bit and if there is a tumble, by the magic of math, they will have tilted the scales a tiny bit in their ‘outperformance’ favour, assuming that their benchmark didn’t lighten up of course (which it most probably didn’t).

The risk of having a lighter allocation than their benchmark of course is that the share price rallies a lot further and faster and the fund manager has egg on their face. The perils of investments, right? Watch the 13 and 50-week moving averages for some clues, near 423p/402p at the moment. Ahead of these some chart support at 455p and the 436p levels are worth watching. If the share price is set to balloon higher then dips should draw out demand (buyers) and remain limited. If instead there is a reversal set to form soon, then a drop to the March 2026 low near 332p will be the first target, with the April 2025 low near 210p key below this. Historically speaking, sub-100p areas are ‘fill your boots up’ levels.

Our bottom line is the usual one for airlines. They go bust. Often. Warren Buffet (see our previous blog on Spirit Airlines) famously hated airlines, but even he got lured into buying their shares now and again. We would favour taking a cautious view on this apparent break higher. Lighten up a bit now and use sustained gains above 510p or 520p as reason to think that the range break higher is for real (and pile back into the name etc.). Hope for the best, plan for the worst?

For further information on our research insights and our 'Ask a Buddy' service where we help clients manage risk and build resilient portfolios, please contact us at info@tricio-advisors.com

Gerry Celaya, Chief Strategist