Boeing Co (BA) is flying high following Wednesday’s earnings release.
And, truth be told, the strength isn’t just isolated to BA. The entire aerospace and defense industry was surging yesterday. From Lockheed Martin Corporation (LMT) to General Dynamics Corporation (GD) and Northrop Grumman Corporation (NOC), gains were had across the board.
The pop in BA stock is particularly interesting, as it finally carried the Dow component back above its 200-day moving average for the first time this year.
For the uninitiated the 200-day moving average is an effective proxy for the long-term trend of a stock. Stocks below the average carry a stink about them, not to mention a bevy of overhead resistance. Once a stock finally resurfaces above the average, it’s game on for the bulls.
If Boeing stock can remain above the 200-day in the weeks ahead, it will do wonders in turning the technicals positive. It has been stuck in a holding pattern for three years now, generating little profits for shareholders outside of its 3%-plus dividend yield.
Boeing’s sudden jump has also reversed its relative strength higher. It has now been outperforming the S&P 500 for the better part of two months.
If you’re a believer that strength begets more strength, look for buyers to flock to BA in the weeks ahead as it attempts to carry the Dow higher.
Reach for Profits with BA Call Spreads
With the earnings drama now subsiding Boeing option contracts are being tossed into the bargain bin. Implied volatility levels are near one-year lows, suggesting you can snatch up derivatives on the cheap. Traders looking for BA stock to return to its 2015 highs near $150 over the summer could buy August $140/$150 call spreads.
The position is initiated by buying to open the August $140 call and selling to open the August $150 call for a net debit of $2.92.
The max loss is limited to the initial $2.92 debit while the max gain is limited to the spread between strikes minus the net debit, or $7.08, and will be captured if Boeing can fly above $150 by expiration.
At the time of this writing Tyler Craig had no positions in any of the aforementioned securities.
