Boeing Stock Hits Turbulence on China Tariff War

The Boeing Company (BA) is the largest airline manufacturer and defense contractor and was the best performer in the Dow Jones Industrial Average in 2017. Boeing remains a leader of 2018, but the stock has hit turbulence since setting its all-time intraday high of $371.60 on Feb. 28. Shares of Boeing have hit a period of high volatility as the stock losses altitude on the possibility that the company will be hurt by the tariff battle between the U.S. and China.

Most on Wall Street say to "buy the dip" on Boeing, as its strong position in commercial aerospace limits the downside risk. I say there are too many uncertainties about how Boeing shares will be affected by the trade war and how the company will handle the Tax Cut and Jobs Act. These factors will likely appear in the form of cautious guidance when Boeing reports earnings on April 26. (See also: Can Boeing Fall Further on China Trade Threats?)

When Boeing reported its fourth quarter earnings on Jan. 31, the company handily beat analysts' estimates, and the stock traded as high as $361.45 on Feb. 1. This was short lived, as the shares tumbled to as low as $317.39 on Feb. 5. Once the market turned higher, Boeing took off and set its 2018 all-time intraday high of $371.60 on Feb. 28. Boeing shares closed Thursday, April 5, at $336.40, up 14.1% year to date but 9.5% below the Feb. 28 high. After Thursday's close, President Trump announce that he was raising tariffs on China by another $100 billion. This had the stock trading as low as $325, which puts Boeing stock in correction territory.

The daily chart for Boeing

Boeing has been above a "golden cross" since Sept. 9, 2016, when the stock closed at $130.89. A "golden cross" occurs when the 50-day simple moving average rises above the 200-day simple moving average and indicates that higher prices lie ahead. The horizontal lines show that Boeing is trading between my quarterly pivot of $316.79, which was a magnet on April 4, and my monthly risky level of $356.63.

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The weekly chart for Boeing

The weekly chart for Boeing will be negative if the stock closes below its five-week modified moving average of $333.93. The stock is above its 200-week simple moving average at $170.77, which is also the "reversion to the mean," last tested during the week of Feb. 26, 2016, when the average was $115.75. The 12 x 3 x 3 weekly slow stochastic reading is projected to end the week at 51.53, down from 59.14 on March 29.

Given these charts and analysis, I recommend that investors buy Boeing on weakness to my annual, quarterly and semiannual value level of $250.43 and reduce holdings on strength to my monthly risky level of $356.63. (For additional reading, see: Where to Invest for a Trade War: Goldman's View.)