Boeing (BA) - Get Report reported a 25% increase in quarterly earnings yesterday, and the company raised its year-end guidance. Shares jumped 1.6%, adding to gains made earlier in the week, and a large hammer candle formed at a key long-term resistance level. A break above this level could initiate a sustained move higher.
The stock has spent most of the year moving below a downtrend line, like one that it traded under in 2014. Over the last several months, however, the stochastics oscillator has been in bullish divergence to price.
The stochastics oscillator shows the location of the close relative to the high-low range over a set number of periods and is designed to capture changes in momentum that precede changes in price. This makes divergences particularly noteworthy as indications of potential directional shifts.
Boeing has already experienced a strong bounce off its August low, but with it now poised at a key technical inflection point and reinforced by positive fundamental news, it may be in the early stages of a significant rally.
The daily chart shows the consolidation leading up to the August bounce as a complex cup-and-handle pattern with rim line resistance at $142.20, intersecting with the 2015 downtrend line and the 200-day moving average. The relative strength index and moving average convergence/divergence reflect the positive price momentum seen on the weekly timeframe, but the money flow indications are equally as important. The accumulation/distribution line is tracking above its rising signal average and Chaikin money flow, a 21-period average of the A/D line, is well above its centerline, indications that the stock is under accumulation.
Boeing is a long candidate after an upper candle close above the rim line area, using a trailing percentage top.
This article is commentary by an independent contributor. At the time of publication, the author had no position in the stock mentioned.