Dow component Boeing Company (BA) is set to open lower once again Friday, a day after Berenberg analyst Andrew Gollan to hit the giant aerospace with a “Sell” rating, in line with a growing skepticism about the 737-MAX re-certification in the wake of the March 2019 grounding, in response to two fatal accidents. The firm also noted the subsidence of demand for the aircraft as a result of the pandemic, highlighted by the negative, Can the orders, including 14 MAX cancellations.
The commercial aviation sector took on massive debt to maintain operations for the first quarter, with an investment of 120 billion dollars of loans bill, which could grow exponentially in the coming months. There will be little fund going for a new aircraft until these debts are paid, increasing the chances that the sales of Boeing will not be back to “normal” levels for several years at a minimum. During this time, the stock has almost doubled off of the March low, reaching prices that may be unsustainable.
The stock well stocked in advance of the pandemic, gaping down just two days after the publication of the all-time high in March 2019. It declined through the rest of the year and until 2020, with repeated delays in MAX, re-certification and disturbing the information to be provided on Boeing’s internal controls undermine buying interest in the former leader of the market. At the bottom, and then abandoned, the dumping of the stock by almost 75% in just six weeks.
The selling pressure has escalated since a two-legged recovery effort above $200 about three weeks. The Accumulation of readings have dropped precipitously off all highs since that time, with “money smart” decision to buy-the hollow of profits and heading to the touch line. Given this aggressive distribution, it won’t take many sellers to dump the stock in an uncomfortable test of the March low double-digit.
Boeing Long-Term Graph (2000 – 2020)
In 2005, a break above the 2000 high at $70.94 stuck below $110 in 2007, opening the way to a topping pattern that broke down in the first quarter of 2008. The sale of the pressure transmitted through the fourth quarter, the removal of the stock to a 14-year low in March 2009. The subsequent rebound of the impasse in the $70 at the beginning of the new decade, delaying a return trip in the front up until 2013. The subsequent breakout made limited progress, ending above $140 in 2014.
The resistance level marked for the next three years, finally giving a breakout after the presidential election in 2016. The stock then soared into the lead on the market, display of the history of gains in March 2019 all-time high at $446. A botched response to the MAX of the grounding triggered a persistent shareholder exodus, with buying interest remains above the $ 300 level until February 2020 ventilation.
Boeing’s Short-Term Prospects
The stock reached a seven-year low in March and rebounded in the second quarter, recovering only half of the losses recorded since the month of February. It has fallen back to the .382 retracement level, telling market players that the downward trend remains intact, despite the 129-point bounce from oversold. It could easily sell in a test of the March low from this price level, trapping the bottom fishers and other people that believe that Boeing is indestructible.
The monthly stochastic oscillator highlights the growing risk, of passage in a complex sell cycle in the first quarter of 2018. The indicator sculpted least two vertices in this persistent, eventually reaching the oversold zone in February 2020. Unfortunately for the rest of the bulls, the slight increase since that time has failed to confirm a new purchasing cycle, although it would now take two weeks of relative strength to complete this task.
The Bottom Line
The rebound of oversold in Boeing stock may be coming to an end, setting the stage for a decline that could easily reach Mars seven-year low.
Disclosure: The author held no positions in the aforementioned securities at the time of publication.