Dow component The Boeing Company (BA) is trading perilously close to the $290 to $300 price zone, a support level that marked December 2018 and January 2020 lows. A breakdown would drop shares of the aerospace giant to a two-year low while completing a topping pattern that could signal the next stage in a secular downtrend. Ominously, shareholders have been running for the exits for a year now, dumping accumulation readings to two-and-a-half-year lows, predicting that price will soon follow suit.
The company has undermined investor confidence since the 737 MAX grounding in March 2019, caught in a web of misstatements that culminated in the firing of CEO Dennis Muilenburg. Boeing now insists that the MAX will fly this summer, but U.S. carriers aren't buying it, removing the airplane from their schedules until at least the fourth quarter. Endless issues continue to plague the aircraft's credibility, with dirty fuel tanks the latest in a long string of unpleasant disclosures.
The coronavirus adds another headwind into the mix, with slumping airline revenues likely to lower the demand for new airplanes. Some carriers may also refuse to take delivery of already-contracted planes when they're ready to fly once again, using the MAX's sordid history as an excuse to reduce costs. More importantly, the pandemic could signal the end of the decade-long economic expansion, affecting Boeing revenues for years to come.
BA Long-Term Chart (1987 – 2020)
The stock charged to higher ground in the 1980s and the first half of the 1990s, topping out at $60.50 in 1997. A breakout in the fourth quarter of 2000 failed after the Sept. 11 attacks, reinforcing a trading range with support in the upper $20s. Boeing broke down to an eight-year low in the mid-$20s in 2003, marking an excellent buying opportunity, ahead of an uptrend that posted impressive gains during the mid-decade bull market.
The rally topped out just above $100 in the summer of 2007, giving way to an orderly decline that sliced through the 2003 breakout level in August 2008. Intense selling pressure continued through the October crash, finally ending less than five points above the 2003 low in March 2009. The subsequent bounce unfolded in two rally waves, completing a 100% retracement into the prior high in 2013.
A breakout into 2014 failed to attract buying interest, settling into narrow range-bound action on top of new support. Committed bulls finally took control after the 2016 election, generating a powerful rally wave that stalled just below $400 in October 2018. The stock fell to a 52-week low during the fourth quarter swoon, while a February 2019 breakout hit an all-time high at $446.01 just 10 days before an Ethiopian MAX crash killed all 157 passengers and crew.
BA Short-Term Outlook
Price action through the rest of 2019 carved a steady but shallow decline toward the December 2018 low at $292, bouncing within 10 points of that level in January 2020. It reversed near 200-day exponential moving average (EMA) resistance for the fourth time since June 2019 in mid-February and is trading near $307 on Wednesday morning. Accumulation readings have matched bearish price action since the grounding and are now hovering just above January's two-and-a-half-year low.
The monthly stochastic oscillator has stretched into the deepest oversold reading since 2009, while the December 2008 low is aligning with the 50-month EMA, highlighting major support between $290 and $300. As a result, that zone marks the line in the sand for Boeing bulls, with a bounce potentially carving the right shoulder of a head and shoulders pattern while a breakdown would confirm a bear market that could cut the stock price in half in coming years.
The Bottom Line
Boeing stock is headed into a critical test at deep support between $290 and $300.
Disclosure: The author held no positions in the aforementioned securities at the time publication.