Is Boeing Stock a Sell on Big 737 Max Order Cancellation?

Boeing stock is falling after the company lost a big-time deal for 50 737 Max jets. Here's the key support level to know now.
By Bret Kenwell ,

Boeing (BA) - Get Report is finally seeing a real, tangible hit from its 737 Max debacle. Shares closed down just 1.33% Monday to $351.12, where it remained in after hours trading, despite news that a large buyer will cancel its order with the plane maker.

So far, Boeing has received a lot of negative press related to the 737 Max, while airlines across the world have grounded their fleets of Boeing's fastest-selling jet. The company even set aside $100 million related to the 737 Max accidents, but so far, it hasn't seen any major financial fallout.

Now it is, though. Saudi Arabia's budget airline Flyadeal is canceling its order for up to 50 737 Max jets. The deal was announced last December and is worth almost $6 billion. So this is no drop in the bucket -- although Boeing has more than enough in its backlog to be OK.

Instead, Flyadeal will shift those orders over to Airbus, opting for the A320neo.

The fear among Boeing investors is that the fallout will be greater than just one airline shifting its orders over to Airbus. What if another airline splits their order now? What if a dozen airlines pause or shift their orders?

That is the real risk for Boeing stock at this point, even if the company remains a cash flow machine. Let's look at the charts.

Trading Boeing Stock

Monday's news certainly isn't great for Boeing stock, but the warning sign for investors came last week. In fact, it came exactly a week ago, last Monday.

The action is highlighted on the chart with a blue box. It shows the very decisive price action, where bears drove BA stock through the key $360 level. One can see just how vital this level has been to Boeing over the last six months, flipping between support and resistance.

Boeing stock shed almost $10 per share on its decline through this mark, and as if losing this level weren't bad enough, shares knifed through the 20-day, 50-day and 200-day moving averages in the same day.

Oh, that's not good.

Boeing stock consolidated for a few days last week before its drop on Monday, July 8, but it's clear that the $357 to $362 area is likely to be resistance moving forward.

Should Boeing stock come under further pressure, see if buyers again step in near $337 to $340. That's where shares were buoyed in May and June, and this level will be closely watched by investors should Boeing fall that far.

On the upside, a close above $362 may attract buyers, but we'll have to see how it's behaving at that time.

Flying Into the Future: A Boeing Timeline

This article is commentary by an independent contributor. At the time of publication, the author had no positions in the stocks mentioned.

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