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Boeing Stock Has Short-Term Potential, But Mind the Ceiling

BA stock shows near-term strength which is not to be confused with a potentially nearing cyclical top


Boeing (BA) shares charged ahead roughly 85% in 2013, and after an early correction this year, Boeing stock once again looks to be heading north in the near term. But will BA shares be able to return to (and surpass) its all-time high?

Shares of airlines and other aerospace-related businesses have risen sharply in recent years, and through the longer-term lens ,the clip at which these stocks have risen is likely not sustainable.

Just yesterday, B/E Aerospace (BEAV) — a manufacturer or interior products for commercial and general aviation aircraft cabins — announced that it is considering a sale, divesting its parts or splitting itself up. The company reportedly hired Citigroup to help with any such changes.

What’s striking about the announcement is its timing — BEAV stock traded at an all-time high last Friday, and after the announcement on Monday, it popped another 9.29%. It’s always worth noting when a company is looking to split or sell itself when shares are at all-time highs, as it can be a sign from management that they want to get out while the getting is good.

To me, this gives us a little perspective in aerospace, and I will be watching for other such announcements and transactions as a sign for a cyclical top for this industry.

Boeing Stock Charts

The longer-term chart of Boeing stock is showing some concerning signs, but until more reference support areas are broken, I think it’s too early to call for an absolute top.

In fact, when a major industry is in a topping pattern, good risk/reward opportunities often present themselves for active investors and traders as the stock bounces off immediate-term oversold levels to potential lower highs.

boeing stock charts weekly
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In the case of Boeing, its stock bounced nicely off the 200-day simple moving average (red line) in April after revisiting it for the first time since January 2013. On Monday, BA’s two-month sideways shuffle came to an end as Boeing stock marginally broke out of the range, above its 100-day SMA (blue) and into its late January down-gap (blue box).

Barring any quick reversal of yesterday’s gains, Boeing stock now stands a good chance of filling the January gap up to the $137-$138 area. It’s too early to tell whether this potential move will ultimately result in BA stock developing a lower high vs. its January highs … and really, right now, it’s not even relevant.

boeing stock chart daily
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Quicker traders and investors might be able to play the near-term upside in Boeing stock based off the aforementioned development. Medium- to longer-term investors should just keep a close eye on the developments in the industry for a potential cyclical top.

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Download Serge’s trading plan in the Essence of Swing Trading e-book here. As of this writing, he did not hold a position in any of the aforementioned securities.

Article printed from InvestorPlace Media,

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