TECHNICAL ANALYSIS BOEING (BA) 10/12/2018
Money Flow – is in an upwards trend, recovering from a November selloff. It is at a neutral reading of 45 which is neither overbought nor oversold.
Momentum is in an upwards trend.
Technical Support – the price level at which buying interest was established and share accumulation by institutions began was $315. This defines the downside risk.
A Mid November low near $300 occurred, this was followed by a higher low near $320. This reflects buyers were willing to come in at a higher price and sellers were not willing to sell below this price.
Why did the share price pullback?
At moneywiseHQ it’s important to understand why a share price pulled back in order to identify whether there is an opportunity or a threat which invalidates the Investment Thesis.
On xx a Lion Air Boeing 737Max aircraft crash in Indonesia. The uncertainty associated with the cause of the crash of a newly developed aircraft caused an initial stock price drop.
The accident was caused by a faulty sensor causing a protective function to operate. The malfunction was misidentified by the crew. Boeing was scheduled to deliver a conference call on the malfunction however this was cancelled, which created uncertainty. Boeing chose instead to consult independently with airline customers to adapt emergency procedures.
A near full price recovery was made before December 1, on which a Chinese executive of Huawei was detained in Canada for extradition to the US on charges of Iran trade sanction violations. This caused a broad market concern that trade negotiations with China would be negatively affected.
What does that mean at MONEYWISEHQ
The Investment Thesis for Boeing remains valid.
The accident and subsequent actions by Boeing were consistent with aviation practice. The arrest of the Huawei executive has no direct affect on sales of Boeing Aircraft to Chinese airlines.
The stock price pullback is an opportunity to add to an existing position or initiate a new portfolio position.
Downside Risk is established at a Technical Support level of $315 with upside reward to $370, near 20% upside with 5% downside risk. $320 is a low risk entry point.
Maintain a disciplined ‘Stop Loss’ price near $310.