Trade of the day is it time to short Ryanair

What: 

Ryanair has had a particularly bad year as far as PR is concerned. They have successfully shot themselves in the foot on more than one occasion. But perhaps the most spectacular fail so far, was the messing up of the pilots rostering in the Autumn, which resulted in 400,000 passenger’s flights being cancelled. This oversight resulted in huge reputational damage to Ryanair and compensation cost of around €25 million. Today it was revealed that more flight cancelations over the Christmas period have been narrowly avoided. 

Ryanair has never recognised unions; however, it has decided to change its policy in order to avoid the cancellation of flight on 20th December due to striking pilots. The represents a huge change in Chief Executive Michael O’Leary, whose has previously said he would rather chop of his own hands than deal with unions. 

O’Leary has been famed for his nonchalant attitude to PR, behaving as he wishes and expecting all those around him to fall into line, but this move marks a serious turnaround in his way of thinking, which could be reflected into company culture. Ryanair is notorious for its poor treatment of customers but maybe the high costs involved in previous Ryanair mishaps could be starting to sink in? 

Passenger numbers released just last week show that November traffic numbers grew by 6%, whilst its load factor – a measured used to assess the fullness of each flight, grew by 1% to an impressive 96%. So its not all bad news. However, year end results in March will no doubt show the impact of the Autumn gaff. 

How: 

Looking at the charts – investors are saying this too little too late. The last month Ryanair has seen a series of lower lows. It has fallen below it 50 SMA and its 200 SMA. The Commodity Channel Index (CCI) has a value of -235, where a value below -100 points to a strong downwards trend. However, the stock is already down heavily this morning, this could be good one to keep on the radar and sell at the next lift.