United Airlines stock price gains nearly 38% in one week as a bailout nears

Shares of United Airlines (NASDAQ:UAL) gained more than 37% this week as the carrier attempts to stage a recovery after the stock price lost 80% of its value in around two months.

All major U.S. carriers received a boost from the Treasury Secretary Steven Mnuchin, who said that the administration will start sending “preliminary information” to airlines about the status of their applications for government assistance on Friday.

Fundamental analysis: Major airlines awaiting multi-billion grants and loans

Shares of all four major U.S. airlines recorded gains this week as they get closer to the government’s assistance. On Thursday, the Treasury Secretary Steven Mnuchin said the administration will start providing “preliminary information” to airlines on Friday, regarding the status of their application for government aid. 

Delta Air Lines, JetBlue, American Airlines, Southwest Airlines, United Airlines, and Spirit Airlines, all confirmed that they applied for government grants. 

Grants and loans were approved as a part of the $2 trillion package approved in the Congress last week. Airlines are expected to receive grants first to avoid job cuts, with additional $29 billion available in loans to passenger and cargo airlines.

It is expected that carriers will receive $25 billion in payroll grants but it is still unclear what Treasury may request in exchange for grants - warrants, options, preferred stock or other securities.

United Airlines said last week that it is decreasing the number of flights from its hub in Newark from 139 daily flights to just 15 for at least the next three weeks.

Technical analysis: Bulls eyeing $38

Shares of United jumped nearly 38% this week after making significant gains on Wednesday and especially Thursday, when the stock price gained almost 15% on Mnuchin’s comments.

The price action now trades around $13 above the multi-year low $17.80 set three weeks ago. For the bulls, a push above the key short-term resistance at $38 is absolutely crucial, before attempting to press higher towards the next important resistance at $50. 

On the downside, the 127.2% Fibonacci support, that capped the February - March crash, will still act as a support for the buyers around the $20 mark.

Summary

Shares of United Airlines gained almost 15% on Thursday after the Treasury Secretary Steven Mnuchin said that the administration will start sending “preliminary information” to airlines about the status of their applications for government assistance on Friday.