The industrial sector has awoken. And with it, many Dow Jones components are looking bullish once more. Chief among the good-lookers is Boeing (NYSE:BA) which just tested its previous peak. This week’s slight pullback is suggestive of more upside to come. Let’s investigate BA stock and build out a position to profit.
To set the stage, we’ll start with a chart of the Dow Jones Industrial Average ETF (NYSEARCA:DIA). Until recently, the Dow was stuck in underperformance mode. Large-cap multinationals have been plagued by trade war jitters and dollar strength. But things are finally looking up. Last week’s launch brought a much-needed spurt of relative to Dow components. And this week’s light volume pullback could be setting up a low-risk entry.
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This year’s performance in Boeing stock can best be described as a well-deserved bout of digestion. From 2016 to 2017, BA stock almost tripled in value creating extreme overbought readings for the weekly and monthly time frames. This year’s pause has allowed the aerospace titan to work through the stretched conditions and build a base to launch from for the next leg of its bull market.
The momentum and volume that accompanied this month’s awakening look promising. Momentum measures like the RSI jumped to a new four month high alongside the price. With overhead resistance looming close and BA stock having already risen so much in its last upswing, this week’s pullback shouldn’t be surprising. What’s particularly impressive is the retreat has been shallow and lacking any warnings signs in volume. Traders should view this as a buying opportunity.
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Take a Ride on BA Stock
Bull call spreads provide a simple way to bank on continued strength. Buy the Nov $360/$370 bull call spread for around $5.40. The risk is limited to the initial investment and will be lost if Boeing sits below $360 at expiration.
The max reward is $4.60 and can be captured if BA rises above $370 by expiration.
As of this writing, Tyler Craig didn’t hold positions in any of the aforementioned securities. Want more education on how to trade? Check out his trading blog, Tales of a Technician.
