Cleared for takeoff?

06/20/19
  • Despite recent challenges, Boeing off less than 17% from all-time high
  • BA got first new orders for 737 MAX airliner this week
  • Stock cleared technical hurdle Tuesday

While Boeing’s (BA) decline from its record high at the beginning of March certainly wasn’t a welcome event for long-term investors, all things considered, it may not have caused them too much consternation.

That’s because a weekly chart shows BA, which on March 1 had more than quadrupled off its February 2016 low around $102, was still up around 265% from that level as of yesterday:

Boeing (BA), 9/13/10–6/19/19. Boeing (BA) weekly price chart. Off highs, but not by much.

Source: Power E*TRADE


The March–June downturn basically took BA shares back to the level of the choppy range they traded in for the majority of 2018 (roughly between $310–$375), which was first broken to the downside at the end of the year before a reversal and spectacular run to the March high around $446.

But after two crashes of Boeing’s 737 MAX 8 airliner and a prolonged investigation and debate surrounding the aircraft’s software, BA dropped 26% from that peak by June 3, when it fell close to $330:

Boeing (BA), 2/27/19–6/19/19. Boeing (BA) daily price chart. Back above technical level.

Source: Power E*TRADE


While a three-month, 26% drop is certainly more than a dip, considering the magnitude of the BA story and the persistence of the media coverage, more than a few traders have likely noted the stock’s overall resiliency. The majority of the sell-off occurred in the first several days after the story broke, after which shares moved sideways for several weeks before swinging to the June 3 low.

This chart also shows that BA recently broke out above a conspicuous technical level: The former support level around $365 formed by the March–April lows, which then became resistance as the stock tested that level in May before blasting through it on Tuesday. True, it was a big up day for the market overall, but BA’s 5% jump was more than five times the size of the S&P 500’s (SPX) gain.

There appeared to be a good reason for that relative strength: News emerged that Boeing had received its first new orders for the 737 MAX since its troubles began—a 200-aircraft request from International Airlines Group, which operates several European carriers, including British Airways, Iberia, and Aer Lingus.1 The stock is now up around 12% from its June low.

Even the most experienced bullish traders wouldn’t be surprised to see at least a partial give-back of huge up move (hmmm, perhaps a test of that breakout/support-resistance level?). But given how well the stock has survived a steady barrage of negative headlines in recent months—and we probably haven’t seen the last of them—more traders may now be thinking about the possibilities if positive stories become more of the norm.

Market Mover Update: Before yesterday’s FOMC announcement crossed the wire, Global Blood Therapeutics (GBT) tacked another 2% onto its rally yesterday.

With one day left until expiration, Molina Healthcare (MOH) June $160 call options, which traded as high as $350 on June 5, are poised to go off the books at $0, with the stock trading below $150 (see “Follow the volume”).

Today’s numbers (all times ET): Current Account (8:30 a.m.), Leading Indicators (10 a.m.), EIA Natural Gas Report (10:30 a.m.).

Today’s earnings include: Darden Restaurants (DRI), Kroger (KR), Red Hat (RHT).

Today’s IPO: Slack Technologies (WORK).

 

Click here to log on to your account or learn more about E*TRADE's trading platforms, or follow the Company on Twitter, @ETRADE, for useful trading and investing insights.


1 CNN.com. Boeing finds the first buyer for a 737 Max since its grounding. 6/18/19.

What to read next...

06/19/19
Options volatility and price action combine to fill out trading picture in fast-moving stock.

06/18/19
Stocks in this industry may be poised to benefit from a potential recovery in small-caps and health care.

06/17/19
Stocks march in place as traders gear up for this week’s Federal Reserve meeting.

Looking to expand your financial knowledge?