Definitely not-for-the-squeamish Delta Air Line's (DAL) stock has plunged in bear-hug fashion during the winter to $9.80 from $14.70, and is now dangerously close to the sell/stop loss at $8.

Delta Air Lines, first discussed here on July 19, 2010, at a price of $10.73, would likely have been a leader of a rejuvenated airline sector until Middle East unrest, including the ongoing civil war in Libya, sent oil prices above $105 per barrel. That crude surge has pushed jet fuel prices -- typically the second biggest or biggest expense for an airline -- substantially higher.

Delta Air Lines (DAL - option chain) stock is trading lower today along with other airlines this morning, hurt by rising oil futures. Oil futures shot up over 7% this morning in response to growing political turmoil in Libya. Libya is the largest oil producer in North Africa, and is responsible for 2% of global daily output. If you think this stock won't be rising too far in the coming months, then it could be a good time to look at a bearish hedged play on DAL.

This morning, DAL opened at $10.99. So far today the stock has hit a high of $10.99 and a low of $10.59. As of 12:35, DAL is trading at $10.65, down $0.85 (-7.3%). The chart for DAL looks bullish and S&P gives DAL a positive 4 STARS (out of 5) buy ranking.

The U.S. airline sector, aided by decreased capacity from mergers, is on course to record one of its best years in many, and Delta Air Lines (DAL), first discussed here on July 19, 2010, at a price of $10.73, may be the leader of the pack.

Nevertheless, keep in mind that I consider Delta to be a high-risk stock not suitable for moderate-risk or low-risk investors. Don't consider DAL if you can't tolerate a 30% to 50% drop in the stock's price: it could happen.

In fact, Delta's share have declined about 22% since hitting highs near $14.70 last autumn; the pullback follows a rise from about $9.50.

Analyst Upgrades

• Home Depot (HD) to buy from neutral at Goldman.
• Delta Air Lines (DAL) to buy from neutral at BofA/Merrill.
• Heico (HEI) to outperform from sector perform at RBC Capital.
• Royal Dutch Shell (RDS.A) to outperform from neutral at Credit Suisse.
• MB Financial (MBFI) to outperform from neutral at RW Baird.
• Quest Diagnostics (DGX) to equal weight from underweight at Morgan Stanley.
• Oshkosh (OSK) to neutral from underweight at JPMorgan.
• Volterra (VLTR) and Silicon Laboratories (SLAB) to buy from neutral at Roth Capital.
• Ascena Retail Group (ASNA) to overweight from neutral at Piper Jaffray.
• Cytec Industries (CYT) to buy from hold at Deutsche Bank.

U.S. stock futures are mostly higher this morning as investors await earnings reports from several companies. However, shares of Apple Inc (AAPL) dropped in pre-market trading. Futures on the Dow Jones Industrial Average rose 37 points to 11,762.00 and S&P 500 futures gained 2.20 points to 1,292.20. Futures on the Nasdaq 100, however, dropped 12.50 points to 2,307.50.

U.S. markets were closed on Monday for the Martin Luther King Day holiday. Stocks closed higher on Friday, with the Dow gaining 55.48 points, or 0.47%.

After a decade of sub-par operations and just plain old bad luck, the U.S. airline sector may be set to soar, and Delta Air Lines (DAL), first discussed here on July 19, 2010 at a price of $10.73, may be the leader of the pack.

Even so, keep in mind that I consider Delta to be a high-risk stock not suitable for moderate-risk or low-risk investors. Don't consider DAL if you can't tolerate a 30-50% drop in the stock's price: it could happen.

Look for Delta's 2011 revenue to jump 11-14% on higher fares and a 1 percentage point rise in its load factor. Enhanced economies of scale stemming from the Northwest Airlines merger, and checked bag and other fees compliment the favorable revenue side of the equation.

Stocks discounted a higher jobless claims release on larger issues. Many called today an extension of QE2, but it was a two-part issue. First was Bernanke issuing a defense of QE2 in in an op-ed piece and second was the note from the White House that Obama may compromise on certain Bush tax cut extensions for all income brackets.

Here were today's unofficial closing bell levels:

Dow Jones 11,434.77 +219.64 (1.96%)
S&P 500 1,221.04 +23.08 (1.93%)
Nasdaq 2,577.34 +37.07 (1.46%)

Top Analyst Calls
High P/E Stocks To Watch

More Monday merger fun, this time from the airline sector. Reportedly, Southwest Airlines (LUV) announced that it will purchase AirTran Airlines for roughly $1.42 billion.

This move will be funded mainly with debt, and it will help Southwest establish a larger presence in cities like Boston and New York. What's more (as the article points out), Southwest will now be in "head-to-head competition with Delta Air Lines in Delta's home base of Atlanta."

Toll Brothers (TOL) closed down 50 cents to $16.60. TOL is expected to report Q3 EPS on August 25. September put option implied volatility is at 41, December is at 44; verses its 26-week average of 41, according to Track Data, suggesting non-directional near term price movement.

Delta Air Lines (DAL) closed down 58 cents to $10.78. WTI Crude Futures are recently down 1.35% to $74.40 according to Bloomberg. DAL call option volume of 11K contracts compares to put volume of 11K contracts. September put option implied volatility is at 52, December is at 57; near its 26-week average of 53 according to Track Data, suggesting non-directional price movement.

Update is by Stock Specialist Paul Foster of theflyonthewall.com

Delta Air Lines (DAL) reported second quarter earnings per share of 55 cents, compared to the First Call estimate of 63 cents, and as expected the current take-no-prisoners stock market treated DAL rudely, sending shares down $1 to $10.73 in mid-day Monday trading.

Even so, for high-risk investors, now may represent a decent time to scoop-up some shares of DAL. Here's why:

Increasing business travel demand, generally tight system-wide capacity for leisure travel in the U.S., and moderating jet fuel prices on lower oil prices, should provide enough of a tailwind to help DAL exceed the $1.55 2010 earnings consensus estimate.

Analyst Upgrades

• Keefe Bruyette upgraded East West Bancorp (EWBC) to outperform from market perform after the company acquired assets from Washington First International Bank. The firm has a $21 price target for shares.
• Piper Jaffray upgraded Amylin (AMLN) to overweight from neutral, citing valuation and Bydureon's profile. The firm maintains a $26 price target for shares.
• Soleil upgraded MGM Mirage (MGM) to hold from sell, citing signs of stabilization in Vegas and valuation. The firm upped its target for shares to $13 from $11.10.
• T. Rowe Price (TROW) was upgraded to outperform from market perform at FBR Capital.
• JetBlue (JBLU) was upgraded to buy from neutral at BofA/Merrill.
• NetEase.com (NTES) was upgraded to buy from hold at Standpoint Research.

Delta Air Lines (DAL) CEO Richard Anderson recently made a cool $1.3 million by selling 100,000 shares of his company's stock at an average price of $13.47 per share. Obviously, this was a nice payday for Anderson, but should this stock sale be a red flag for Delta investors?

Analysts and traders love to watch insider stock transactions because they believe it will give them insight into the health of the company. If insiders are buying stock in their own company, it is viewed as a bullish sign for the company. If insiders are selling stock in their own company, it is often viewed as a bearish sign for the company. After all, who has more information about how well the company is doing than the CEO or some other member of senior management, right?

Unfortunately, it's not that cut and dry.

Early this morning, United Airlines (UAUA) and Continental Airlines (CAL) announced that they will join forces to create the world's largest airline in a $3 billion deal.

The new airline will be bigger than Delta Air Lines (DAL) and will send flights as far as Shanghai and South America. The companies believe that the span of destinations should attract more business travelers and their higher fares. The deal, which will need approval from shareholders and antitrust regulators, is expected to close in the fourth quarter. The new company will be known as United Continental Holdings and will be based in Chicago. The airline's largest hub will be located in Houston.

Another day, another airline fee and this time it's for carry-on luggage! Is there no limit to these fees? Spirit Airlines, out of Fort Lauderdale, Florida, is going to start charging a fee on August 1, 2010. The only group that is not chagrined are probably the nudists that travel light when vacationing.

Given all the fees the airlines are tacking on they might as well evolve into banks. Actually I think this is another instance where business has learned a bad lesson from government agencies. The government may require legislative action to raise taxes but bureaucrats the world over seem to be able to add new fees at will.

It's a bitter pill for U.S. airlines, but it's medicine they have to take.

Beginning next month, airlines can be fined up to $27,500 per passenger if a plane is delayed three hours and passengers can't get off the plane, according to a new federal rule issued by the U.S. Department of Transportation, The Associated Press reported Wednesday.

Airlines may respond by canceling flights, but the goal of the program is to encourage airlines to do a better job of scheduling flights and crews -- and, by extension, a better job of treating passengers.