Boeing has been one of the many COVID-hit stocks that has seriously underperformed in this rally, after all it’s still below the 50% retracement line from 2020 highs-to-lows. While BA fundamentally may not be in the clear, technically it is displaying some signals that may be an opportunity worth taking the risk on.
The Charts
1D Chart with 50, 100day, & 200day MA. Daily TTM squeeze has not released yet while momentum is up.
1hr Chart with flat line resistance at $179 & then 100day/gap fill at $181. Hourly TTM squeeze has not released yet while momentum is up.
30min Chart is virtually same as 1hr except for squeeze momentum which its different as we have a different candle length.
The Trade
BA traded down after recent earnings followed by a bounce off the 100day MA at $170. The technicals after this bounce are positive. BA reversed off the 100day back into the 21day historical range & formed a small inverted H&S in doing so
As it reversed off the lows, BA actually managed to break out of a trend resistance line and pop to $190 -flat line resistance- only to come back down below trend on a gap down. BA is essentially coiling, and we can see this in the TTM Squeeze. On both the hourly and daily squeezes momentum has turned up while both are yet to cross 0 level and both yet to release out of squeezes.
The 100day at $181 may be a key level to go long at (despite the fact that all market participants are aware of BA’s 100day which may make a breakout above that level trickier), and a sustained move above $184 can lead up back to $190 and then to $200. Additionally, a sustained break above the downward trend resistance line on charts would be a bullish long-signal. It should be noted that we just broke above this trend resistance last week only to fall back under end of last week; in other words, watch out for more false breakouts.
Another aspect of this trade is the money flow. BA is obviously a large component of both XLI & DIA and generally moves with its sector. XLI is considered part of the “value” trade, and it is worth noting that the “value” trade has been in relative fashion for the past couple weeks with notable large moves last week for the first time in a while. If we look at some of BA’s suppliers like ATI SPR whose business relies **heavily** upon BA we find nearly identical -bullish reversal- chart patterns. On top of this, XLI DIA SPR all had bullish options activity last week with XLI SPR calls bought & DIA unusual put sells. Note also the strength not only in XLI but across value in XLF XOP, and more specifically JETS. JETS had a nice move off the lows and actually broke out above $17.20 last week only to retest that breakout on Friday. A continued move higher in other COVID-hit & sector related stocks would likely bode well for BA.
It is my intention to observe my hypothesis and take calculated risk if I want to play it. To keep to my discipline, I am looking to go long on trendline break with a starter (⅓ or ¼ position of 9/18 calls, 65delta for safety or 35delta for leverage) and will potentially add if we can get a sustained move above $184. My target on this trade is initially a retest of $190 which is recent resistance highs off bounce from lows August 3rd and then $200 with a high target of $220. I do not expect the trade to go straight up, and it is possible none of this plays out as observed - BA has been a choppy trade over the past few months to say the least and it’s not like the fundamental business has improved. With discipline regarding entries and exits risk is lowered & players have the ability to take this trade as both a move to the 100day and a potential move above it to $190 or higher.
It may be worth adding that I'm looking at industrials on the whole to breakout with notable setups in MLM FLR MTZ SUM, WM, SPR ATI JETS.
The Charts
1D Chart with 50, 100day, & 200day MA. Daily TTM squeeze has not released yet while momentum is up.
1hr Chart with flat line resistance at $179 & then 100day/gap fill at $181. Hourly TTM squeeze has not released yet while momentum is up.
30min Chart is virtually same as 1hr except for squeeze momentum which its different as we have a different candle length.
The Trade
BA traded down after recent earnings followed by a bounce off the 100day MA at $170. The technicals after this bounce are positive. BA reversed off the 100day back into the 21day historical range & formed a small inverted H&S in doing so
The 100day at $181 may be a key level to go long at (despite the fact that all market participants are aware of BA’s 100day which may make a breakout above that level trickier), and a sustained move above $184 can lead up back to $190 and then to $200. Additionally, a sustained break above the downward trend resistance line on charts would be a bullish long-signal. It should be noted that we just broke above this trend resistance last week only to fall back under end of last week; in other words, watch out for more false breakouts.
Another aspect of this trade is the money flow. BA is obviously a large component of both XLI & DIA and generally moves with its sector. XLI is considered part of the “value” trade, and it is worth noting that the “value” trade has been in relative fashion for the past couple weeks with notable large moves last week for the first time in a while. If we look at some of BA’s suppliers like ATI SPR whose business relies **heavily** upon BA we find nearly identical -bullish reversal- chart patterns. On top of this, XLI DIA SPR all had bullish options activity last week with XLI SPR calls bought & DIA unusual put sells. Note also the strength not only in XLI but across value in XLF XOP, and more specifically JETS. JETS had a nice move off the lows and actually broke out above $17.20 last week only to retest that breakout on Friday. A continued move higher in other COVID-hit & sector related stocks would likely bode well for BA.
It is my intention to observe my hypothesis and take calculated risk if I want to play it. To keep to my discipline, I am looking to go long on trendline break with a starter (⅓ or ¼ position of 9/18 calls, 65delta for safety or 35delta for leverage) and will potentially add if we can get a sustained move above $184. My target on this trade is initially a retest of $190 which is recent resistance highs off bounce from lows August 3rd and then $200 with a high target of $220. I do not expect the trade to go straight up, and it is possible none of this plays out as observed - BA has been a choppy trade over the past few months to say the least and it’s not like the fundamental business has improved. With discipline regarding entries and exits risk is lowered & players have the ability to take this trade as both a move to the 100day and a potential move above it to $190 or higher.
It may be worth adding that I'm looking at industrials on the whole to breakout with notable setups in MLM FLR MTZ SUM, WM, SPR ATI JETS.
Comment:
This trade looks to be ready to make that move higher. I still need to hold above $179 to confirm breakouts. So far, as we have seen, BA has been a choppy trade known for fakeouts and lack of buying support. Let's see if that can change.