Boeing Hits Market Headwinds After October High

Daily technical chart showing the performance of The Boeing Company (BA) stock

The Boeing Company (BA) is the largest manufacturer of commercial airplanes and is also a defense contractor and builder of space and security systems. Boeing was the best performer in the Dow Jones Industrial Average in 2017 and remains a leader in 2018, but the stock has hit some turbulence since setting its all-time intraday high of $394.28 on Oct. 3.

Boeing closed Monday, Oct. 22, at $355.98, up 20.7% year to date and 9.7% below its all-time high, but it is now in bull market territory at 20.5% above its Jan. 2 low of $295.40. Despite a new high, the stock appears to be vulnerable and must hold its 200-day simple moving average of $347.56. Another problem is that the weekly chart for Boeing became negative one week after the stock set its all-time high.

Boeing reports quarterly earnings before the opening bell on Wednesday. Oct. 24, and analysts expect the company to disclose earnings per share between $3.51 and $3.58. A key metric is commercial airline deliveries, which are expected to be below expectations despite robust earnings from airlines and strong passenger traffic. The key models for Boeing include the versions of the 737.

The daily chart for Boeing

Courtesy of MetaStock Xenith

Boeing has been above a “golden cross” since Sept. 9, 2016, when the stock closed at $130.89. A “golden cross” occurs when the 50-day simple moving average rises above the 200-day simple moving average and indicates that higher prices lie ahead. This positive configuration remains in play, but the chart clearly shows that the two moving averages are converging at $359.39 and $347.56, respectively. The horizontal line at $346.57 is my monthly value level. The horizontal lines below the 200-day simple moving average are my semiannual and annual value levels at $286.66 and $250.43, respectively. A gap below these levels would be extremely negative.

The weekly chart for Boeing

Weekly technical chart showing the performance of The Boeing Company (BA) stockCourtesy of MetaStock Xenith

The weekly chart for Boeing is negative, with the stock below its five-week modified moving average of $360.43. The stock is above its 200-week simple moving average at $203.30, which is also the “reversion to the mean,” last tested during the week of Feb. 26, 2016, when the average was $115.75. The 12 x 3 x 3 weekly slow stochastic reading is projected to decline to 62.93 this week, down from 72.19 on Oct. 19.

Given these charts and analysis, my trading strategy is to buy Boeing shares on weakness to my monthly, semiannual and annual value levels of $346.57, $286.66 and $250.43, respectively, and to reduce holdings on strength to my quarterly risky level of $420.84.

Disclosure: The author has no positions in any stocks mentioned and no plans to initiate any positions within the next 72 hours.

Source link


Please enter your comment!
Please enter your name here