Join the Bearish Party in Boeing Stock for Solid Gains

Bearish ideas on Boeing (NYSE:BA) stock aren’t new. The struggling airplane manufacturer has been a mainstay among the watchlist of short-sellers. Serial underperformance and ugly sentiment will do that to a stock. The timing of today’s spotlight on BA stock isn’t random. Its share price is on the verge of breaking major support and could see renewed selling pressure.

Boeing (BA) logo on the side of an airplane

Source: vaalaa / Shutterstock.com

Serial underperformance and ugly sentiment will do that to a stock.

The timing of today’s spotlight on BA stock isn’t random. Its share price is on the verge of breaking major support and could see renewed selling pressure.

Boeing’s struggles are being exacerbated by persistent weakness in aerospace and defense stocks. Lockheed Martin (NYSE:LMT) saw its share price tumble 10% after earnings last week. Northrop Grumman (NYSE:NOC) didn’t fare much better, falling approximately 9%.

Still, Boeing’s chart is the worst of the bunch. So if you think the weak get weaker, then BA stock is the top pick.

Let’s take a closer look at Boeing stock from multiple perspectives.

The Big Picture for BA Stock

Boeing’s post-pandemic recovery followed the flight path of the airline industry. This was a good thing for the first year of the rebound, but since sentiment has soured for airline stocks, the correlation has not been helping.

To illustrate the relationship, check out the weekly chart. BA stock is displayed using candlesticks. The Global Airlines ETF (NYSEARCA:JETS) is plotted as a line. To complete the comparison, I added a correlation coefficient study in the lower panel.

Boeing (BA) weekly chart with descending triangle.

Source: The thinkorswim® platform from TD Ameritrade

Here’s what I find noteworthy.

In the months preceding the pandemic crash, the correlation between Boeing and JETS wasn’t all that strong. Both tickers carried a negative correlation throughout Q4 2019. Post-pandemic, however, BA got lumped in with the airline industry and has been following it to this day. The current 10-day correlation is an extremely high 0.91.

As long as the relationship holds, it’s going to be difficult for Boeing stock to rise unless investors warm to airlines too.

From a charting perspective, the weekly time frame hosts a descending triangle pattern. The series of lower pivot highs show sellers’ strength building. At the same time, support at $205 is holding firm and gives traders an obvious level to trade around. Any bear trades at this juncture should be contingent on the floor breaking.

Boeing’s Daily Chart Tells More of the Story

The daily view provides a more detailed picture of how the descending triangle pattern has developed over nine months. Given the bearish glide path, we’re now below the 200-day, 50-day and 20-day moving averages. Last month we tried to push back above the 200-day, but got rejected multiple times.

If nothing else, this confirms sellers’ dominance.

Boeing (BA) stock daily chart with bearish breakout

Source: The thinkorswim® platform from TD Ameritrade

BA stock has firmed up over the past three days and is rallying nearly 2% at the time of this writing Monday morning. The ascent reveals buyers aren’t giving up on the $205 support zone without a fight.

We had sold off consistently for a few weeks into the support test, so the bounce allows some of the oversold pressures to ease.

The best-case scenario for bears is to have this upswing reverse before taking out the 20-day and 50-day moving averages near $217. A lower pivot high would form at that point, signaling a continuation in the descending triangle pattern.

In timing a trade, I think you could enter when the lower pivot forms or wait for the ultimate break of significant support at $205. Either way, BA bears close watching over the next week.

When it comes to strategy selection, put spreads offer a low-cost route to profit from the next downswing.

How to Trade BA Stock Today

If you’re interested in making  a move in Boeing stock today, I suggest the following: Buy the Dec $210/$200 put spread.

The current cost is $4, but will vary depending on which of the triggers you take. The risk is limited to your original purchase price, and the max gain is $10 — the trade cost.

On the date of publication, Tyler Craig was long JETS. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

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