After a hard technical crash landing Boeing (NYSE:BA) and the broader market are finding a bid in front of the holiday. But while BA stock bulls may have reason to be thankful, the price chart is unclear whether Boeing is about to take-off or if a smorgasbord for bears is readying to be served.
Let me explain.
If misery loves company, then Dow Industrials constituent BA stock is certainly not alone. Shares of the airline giant spiraled to their lowest prices since the first week of January during Tuesday’s session. Along with index peer Apple (NASDAQ:AAPL), which hit six-month lows, panicky trade backed by macro trade war tensions, rising interest rates and economic growth concerns sent the Dow Jones Industrial Average to its worst pre-Thanksgiving start in nearly 40 years.
Throw in unwanted baggage over safety issues tied to Boeing’s recently downed 737 airliner and the bearish co-conspirators have taken BA stock from record highs in early October to crashing nearly 25% over several weeks.
So now that bearish investors have carved up Boeing shares, is it a good time for bulls to gobble up a leaner BA stock? Or is it a more appropriate setting to feast on a short stock position?
BA Stock Weekly Chart
Charts are never just bullish or simply altogether bearish. BA stock right now embodies this point 110%. The fact of the matter is bulls and bears both have technical evidence supporting why purchasing Boeing or shorting shares makes sense for investors.
For the former bull camp, BA has now corrected by nearly 25% from its October highs. Price action of this type is generally healthy. It’s also far from unusual, particularly so as the broader market has been under its own version of a correction.
Furthermore, as the weekly chart for BA stock indicates, shares have pierced the lows of a corrective base formed back in early 2018. This can be seen as a potentially bullish technical development as the price action has reset a fairly high and typically less stable weekly base count.
How to Play BA Stock
For BA stock bulls that are agreeable with this logic, I’d recommend waiting for the oversold situation to firm up slightly before entering long shares. Putting shares of Boeing on the radar for an entry above this week’s potential hammer reversal pattern is one simple, but effective approach.
If investors are versed in options spreads, being a bit more aggressive than using a weekly chart confirmation might be ideal. I’m favoring an out-of-the-money and moderately bullish Jan $340 / $360 / $380 butterfly call spread for up to $2.50 to protect, better serve and preserve investors’ wallets.
Alternatively, the same correction put BA stock into a bear market when shares tumbled 20% below its highs. I’m personally not a buyer of broad-stroke warnings like that. However, I would be a “buyer” of shorting Boeing under certain conditions.
For a short entry in BA stock the recommendation would be to wait for a move below $314, which would put shares back in bear territory. I’d use an 8% stop-loss on this type of position. This looks appropriate for both money management and technical reasons.
A triggered buy order to exit the short on BA stock would keep losses contained to a manageable amount. That’s smart business. Secondly, this protective order will pull bears out of Boeing modestly above price resistance as a potential hammer pattern receives bullish price confirmation … and that’s another very good reason to exit and move on in one piece.
Disclosure: Investment accounts under Christopher Tyler’s management do not currently own positions in any securities mentioned in this article. The information offered is based upon Christopher Tyler’s observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. For additional options-based strategies, related musings or to ask a question, you can find and follow Chris on Twitter @Options_CAT and StockTwits.
