Dow component The Boeing Company (BA) is set to open lower once again on Friday, one day after Berenberg analyst Andrew Gollan hit the aerospace giant with a "Sell" rating, in line with growing skepticism about 737-MAX re-certification following the March 2019 grounding in reaction to two fatal crashes. The firm also noted slumping aircraft demand as a result of the pandemic, highlighted by negative May orders that included 14 MAX cancellations.

The commercial airline sector has assumed massive debt to maintain operations since the first quarter, with a $120 billion loan bill that could grow exponentially in coming months. There will be few funds left over for new aircraft until these debts are paid off, raising the odds that Boeing sales won't return to "normal" levels for several years at a minimum. Meanwhile, the stock has nearly doubled off the March low, reaching prices that may now be unsustainable.

The stock topped out well before the pandemic, gapping down just two days after posting an all-time high in March 2019. It drifted lower through the rest of the year and into 2020, with repeated delays in MAX re-certification and worrisome disclosures about Boeing's internal controls undermining buying interest in the former market leader. The bottom then dropped out, dumping the stock nearly 75% in just six weeks.

Selling pressure has escalated since a two-legged recovery effort stalled above $200 about three weeks ago. Accumulation readings have dropped precipitously off all-time highs since that time, with "smart money" taking buy-the-dip profits and heading to the sidelines. Given this aggressive distribution, it won't take many sellers to dump the stock into an uncomfortable test at March's double-digit low.

Boeing Long-Term Chart (2000 – 2020)

Chart showing the share price performance of The Boeing Company (BA)
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A 2005 breakout above the 2000 high at $70.94 stalled below $110 in 2007, giving way to a topping pattern that broke to the downside in the first quarter of 2008. Selling pressure escalated through the fourth quarter, dropping the stock to a 14-year low in March 2009. The subsequent bounce stalled in the $70s at the start of the new decade, delaying a round trip into the prior high until 2013. The subsequent breakout made limited progress, ending above $140 in 2014.

That level marked resistance for the next three years, finally yielding a breakout after the presidential election in 2016. The stock then soared into market leadership, posting historic gains into March 2019's all-time high at $446. A botched response to the MAX grounding triggered a persistent shareholder exodus, with buying interest holding steady above the $300 level until the February 2020 breakdown.

Boeing Short-Term Outlook

The stock hit a seven-year low in March and bounced into the second quarter, recouping just half of the losses posted since February. It has now dropped back to the .382 retracement level, telling market players that the downtrend remains fully intact despite the 129-point oversold bounce. It could easily sell off into a test of the March low from this price level, trapping bottom fishers and other folks who believe that Boeing is indestructible.

The monthly stochastic oscillator highlights growing risk, crossing into a complex sell cycle in the first quarter of 2018. The indicator carved two lower highs in this persistent pattern, finally reaching the oversold zone in February 2020. Unfortunately for remaining bulls, the uptick since that time has failed to confirm a new buy cycle, although it would now take just two weeks of relative strength to complete that task. 

The Bottom Line

The oversold bounce in Boeing stock may have come to an end, setting the stage for a decline that could easily reach March's seven-year low.

Disclosure: The author held no positions in the aforementioned securities at the time of publication.