buy or sell the Omicron dip?

The International Consolidated Airlines Group (LON: IAG) share price crashed by more than 14% on Friday as investors reflected on the new virus variant. The stock ended the week at 131p, which was the lowest level since December last year. It has fallen by more than 40% from its highest level this year. 

British Airways parent company slides

IAG is the parent company of British Airways, Iberia, and Aer Lingus. Like all other companies in the aviation industry, the company’s stock crashed hard on Friday after South African confirmed a new version of Covid-19. 

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The new variant is now known as Omicron and is seen as being more dangerous than the Delta variant. It is able to avoid the vaccines and it is spreading faster. This means that the world could be in trouble in the coming months.

IAG share price was not the only one to crash. Companies like Rolls-Royce, United Airlines, American Airlines, and Delta also plunged on Friday.

Sadly, there is a likelihood that these stocks will drop sharply when the markets open. Besides, more countries like the United Kingdom, Netherlands, and Australia have confirmed more cases in the past few days. They have also announced more measures to restrict travel from South African countries.

Still, fundamentally, I believe that these shares will bounce back as investors reflect more about the Omicron variant. Besides, countries are more prepared now about how to live and manage the virus. Also, some countries like the UK have committed to press forward with the reopening process. 

The Omicron variant news came at a time when IAG was doing relatively well. The company recently restarted its most profitable route between the US and the UK. It has also ramped up its capacity in the past few weeks.

IAG share price forecast

The daily chart shows that the IAG share price has ignored the recent good news and headed south. The stock has dropped by more than 40% from its highest level this year. Subsequently, it has dropped below the important 50-day and 25-day moving averages. 

The stock has also managed to move below the important support level at 136p, which was the lowest level on September 16th. Therefore, I suspect that the shares will have a relief rally on Monday as investors reflect more about the variant. Still, in the medium term, we can’t rule out a situation where the stock resumes the bearish trend.