Just before the Boxing Day lows on 12/14/18, I picked up a hefty amount of shares with a cost basis of 308.00. Shortly thereafter Boeing rocketed higher (pun intended) off its lows and through its 200-day moving average before stalling in consolidation mode. I sold out, what a mistake. Sure I made a nice 13% in 4 trading days, however after pausing shorting it made new all-time highs off the back of a great quarter. (insert #), (div boost) dividend increase to boot. So the moral of the story is own it, don't trade it!
There are many potential positive catalysts that can send the stock back to the stratosphere, let's review a few.
First, and something that's been forgotten, is Boeing has upside on any trade deal with the Chinese. Many people that follow the stock know they have substantial Chinese exposure with 1 in every 4 planes produced by Boeing end up in the PRC. This has caused a large cloud that has been hanging over the shares during the broad market to sell-off at the end of 2018.
However what people found out (based on the last quarter #'s) is that trade war or not, the Chinese cannot afford to cancel their orders as their backlog extends well into 2025 and another nation like Vietnam (who just placed a big order) would love to jump the line. Boeing said the order was worth $12.7 billion.
Now one thing should be noted. It is true with this most recent crash of Ethiopian flight (NUMBER) that there is headline risk. Some would argue a lot of headline risk. Even me, a bull, sees the stark similarity between the two crashes that knocked off 30 billion in market capitalization in just three days! Now there could be a serious issue lingering, waiting to be found. I doubt that is the case, and I believe the stock price reflects any moderate issue. Furthermore, one thing that no one is talking about is the lack of training the pilots had based on American standards. In this most recent crash, the Co-Pilot had 250 flying hours, which is a small fraction of 1500 required by the FAA in the United States. There is a reason the United States has not had a fatal crash in over 10 years. Do not look past pilot error, in both crashes.
My verdict: the decline of this magnitude is unwarranted, and the stock is oversold.
Looking to the past, Boeing has an excellent track record when dealing with airline issues. Just look back to how the management team handled the Dreamline fiasco.
Boeing has a fantastic, and well-connected management team, and board. Just look at some of the well connected influential members on their staff.
-Head of Boeing Operations is Timothy Keating, who was the Clinton White Huse as special assistant to the President.
-Dennis Mullengerg CEO of Boeing and a friend of the Trump Administration.
-Patrick Shanahan 31 year employee of Boeing, and the acting SECDEF
-Kenneth Duberstein White House Chief of Staff from 1988 to 1989.
-Admiral Edmund P. Giambastiani Jr. Director Since 2009, Seventh Vice Chairman of the U.S. Joint Chiefs of Staff; Former NATO Supreme Allied Commander Transformation; Former Commander, U.S. Joint Forces Command.
-Caroline Kennedy Former U.S. Ambassador to Japan
-This is just to name a few. This list of directors is essential because of the clout they will have to get the planes back in the air faster than virtually any other board of Directors due to their strong connections in Washington. This limits any meaningful, long-term downside risk.
-The software patch has already been released.
-The black boxes are being analyzed in France by the end of next week, meaning there will be a resolution in the near future.
-The strong dividend for an industrial company gives yield protection as the stock moves lower.
Fundamental Analysis of the stock shows the share price remains above the 200 moving average which is a positive signal for traders as well as momentum money.
How to play the situation going forward?
Look for high a high volume day where the share price opens and closes relatively unchanged, and the closing price is in the middle of the trading range for the day.
Watch the MACD Histogram (see below) and wait for a trend reversal
Watch the Market Forecast (see below) and wait for a number around 20 with the green line pointing upward.
Entry Points?
Any time the stock touches the 200 days inter day and closes above the 200-day moving average.
If it breaks below the 200 days wait for two consecutive positive days before buying.
If it keeps going up good entry point is any day before breaking the 50-day moving average (yellow line)
Consider buying put options to protect an existing position. The 358 strike (right above the 200 days) is very attractive.
