Boeing (BA - Get Report) continues to face credibility issues and the stock should be sold as a "source of funds." Investors should remove the stock from their investment portfolios with it between its 200-day simple moving average at $362.27 and its monthly risky level at $383.08.
Quality control issues on Boeing production floors should be concerns for investors and fliers. We know that production of the 737 MAX 8 has been reduced by 20% and several airlines will keep their flights of the jet grounded until August.
The New York Times reported over the weekend the production of the 787 Dreamliner was facing quality control issues at Boeing's factory in North Charleston, South Carolina. Employees have complained about being pushed to speed production that lacked oversight and compromised safety.
The bottom line is that Boeing is facing questions on finishing the software fix for the anti-stall system for 737 MAX. At the same time, the company faces safety lapses in the production of the 787 Dreamliner.
Analysts expect Boeing to earn $3.11 to $3.26 per share when it reports earnings before the opening bell on Wednesday. Some say that not lowering full-year guidance would be a huge surprise. This will be a close call as production slowdowns have not been in the headlines until April. In addition, Boeing has been offering "the fix is complete" notion throughout the aftermath of the tragic crashes of the 737 MAX 8.
The Daily Chart for Boeing
Courtesy of Refinitiv XENITH
The daily chart for Boeing shows the price gap lower on March 11 that was caused by the Ethiopian crash. After the Lion Air Boeing 737 MAX 8 crashed in October Boeing beat analysts' earnings-per-share estimates on Jan. 30, which led the stock to its all-time intraday high of $446.01 on March 1.
The close of $322.50 on Dec. 31 was the year-end input to my proprietary analytics and resulted in its semiannual and annual value levels are $323.80 and $302.60, respectively, which remain my downside price targets. The March 29 close at $381.42 was the latest important input to my analytics and resulted in a monthly pivot at $383.08 and a quarterly risky level at $460.36. Note that the post-Ethiopia crash high was $298.66 on April 5 which was a failed test of the 50-day simple moving average at $398.31. Note that the 200-day simple moving average is a support at $362.27.
The Weekly Chart for Boeing
Courtesy of Refinitiv XENITH
The weekly chart for Boeing is negative with the stock below its five-week modified moving average at $383.37 which lines up with the monthly pivot at $383.08. The stock is well above its 200-week simple moving average or "reversion to the mean" at $232.11. The 12x3x3 weekly slow stochastic reading is projected to decline to 38.64 this week down from 45.63 on April 18.
Trading Strategy: Buy weakness to the semiannual and annual value levels at $323.80 and $302.60, respectively, and reduce holdings on strength to the monthly risky level at $383.08.
How to use my value levels and risky levels:
Value levels and risky levels are based upon the last nine weekly, monthly, quarterly, semiannual and annual closes. The first set of levels was based upon the closes on Dec. 31. The original semiannual and annual levels remain in play. The weekly level changes each week; the monthly level was changed at the end of January, February and March. The quarterly level was changed at the end of March. My theory is that nine years of volatility between closes are enough to assume that all possible bullish or bearish events for the stock are factored in. To capture share price volatility investors should buy on weakness to a value level and reduce holdings on strength to a risky level. A pivot is a value level or risky level that was violated within its time horizon. Pivots act as magnets that have a high probability of being tested again before its time horizon expires.