Trade of the Day: Boeing Co Is Leveling Off

BA stock looks to have gotten ahead of itself in the near term

ba stock - Trade of the Day: Boeing Co Is Leveling Off

Source: Phillip Capper via Flickr

The industrial sector of stocks of the S&P 500 has fared notably well so far in 2018, and while I am not one for fighting momentum, I am increasingly getting signals that stocks in this sector are likely overdue for a pause. Within this space, shares of Boeing Co (NYSE:BA) are already up 14% for January, which comes after a 90% rally in 2017 and look to be getting ahead of themselves in the near term.

So you know, Boeing is scheduled to report it next batch of earnings on Jan. 31, or about two weeks from today.

This is a good spot for me to remind ye faithful that stocks must be analyzed and respected in multiple time frames to give oneself the best odds of success in trading and investing over time.

To wit, while through the lens of structural analysis I am a big bull in BA stock — as air travel is set to significantly grow in the coming decade — I do not believe I have to pay any price to be part of this bullish theme, particularly not in the near-term.

BA Stock Charts

Click to Enlarge

Moving averages legend: red – 200 week, blue – 100 week, yellow – 50 week

As usual for the sake of gaining some perspective, let’s start by looking at the multiyear weekly chart of BA stock.

Here we see in picture format what I described above, which is to say that the slope of the line, i.e. of the chart, has continually increased over the past few quarters. With the strong rally out of the gate so far in January, the stock now literally displays a parabolic movement and has also overshot the upper resistance line of the up-trend from early 2017.

To be clear, this does not necessarily have to mean that the stock must fall apart from here. Rather, the odds are higher for now to just bet that BA stock will slip into a consolidation phase with some downside motion.

Click to Enlarge

Moving averages legend: red – 200 day, blue – 100 day, yellow – 50 day

On the daily chart, we see the blue arrows that have been printing on the chart for the past few days. This is my proprietary Vertical X Pro Indicator that alerts me when a stock is getting into overbought territory. Specifically, once the blue arrow stop printing the stock in question will be ripe for a consolidation phase. I expect the blue arrows to stop printing any day now.

Note the last time when the blue arrows stopped printing in late July 2017, BA stock then fell into a multiweek consolidation phase.

As such, those active investors currently long BA stock could look to take some profits with the goal to re-buy at lower prices. More agressive traders may even consider shorting some BA stock or buying puts or put spreads with two or more months left to expiration for a 5%-7% pullback in Boeing for now.

Check out Serge’s Daily Market Outlook for Jan. 16.

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