Southwest Airlines (LUV) is at a key technical level that could determine the next market move. Since April, the airline has been supported by an upward trendline, proving reliable and pushing prices higher. In July, LUV reached a $37-38 resistance zone, only to face strong selling pressure, resulting in a swift drop and a noticeable gap in its chart.

Currently, LUV trades around $33.40, testing the crucial support line once more. If buyers rally here, there is potential to fill the gap and return to the $37-38 zone, a potential 10-12% increase from current levels. Bulls seek consolidation beyond this zone to indicate buyer dominance and potential new highs. Conversely, a decisive break of the trendline would negate the five-month uptrend and could lead to lower prices.

Traders are advised to observe the stock’s behaviour around this trendline. A bounce with increased volume might be a long opportunity, whereas a break below could signal a short entry. The current setup suggests patience, waiting for the stock to indicate its desired direction rather than anticipating a move.

Southwest Airlines is at a make-or-break point for us right now, sitting directly on a key ascending support trendline around the $33.40 level. This line has propped up the stock since late April 2025, making this a critical test. How the stock reacts here in the next few days will likely set the tone for the rest of the year.

For those of us leaning bullish, a bounce from this level opens up a clear path to fill the price gap left from the sharp rejection back in July 2025. This implies a move back toward the $37-38 resistance zone, a potential gain of over 10%. A good way to play this would be to look at the November or December 2025 call options, which would give the trade enough time to play out if buyers step in.

The bullish case has some fundamental support, as recent TSA data for the third quarter of 2025 showed passenger volumes running about 5% ahead of the same period in 2019. This indicates that travel demand remains incredibly strong, despite some economic headwinds. This underlying strength could provide the fuel needed for buyers to defend this technical level.

On the other hand, if this support line breaks, the technical picture would get ugly fast. A decisive close below this trendline would invalidate the entire five-month uptrend and could signal a much deeper slide. In that scenario, buying November 2025 put options with a strike price around $33 or lower would become an attractive strategy.

This bearish view is reinforced by persistent cost pressures that we saw in the most recent earnings report. WTI crude oil prices have remained stubbornly high, hovering in the $85-90 per barrel range, which continues to squeeze airline profit margins. This fundamental headwind could be exactly the excuse sellers need to finally push the stock below its long-term support.

The strategy now is to wait for confirmation rather than guessing the direction at this inflection point. We should watch for a strong bounce with an uptick in volume before buying calls, or a clean break and close below the trendline to initiate any bearish positions with puts. Patience is key, as a premature move could easily result in getting caught in a head fake.