Sales of wide-body aircraft have fallen in the last two years, putting pressure on Boeing Co (BA) and its erratic 787 Dreamliner rollout. Cyclical forces have also weighed on the Seattle aerospace giant, with a mixed world economy inducing air carriers to rebuild old planes rather than buy new ones. Governments have added a third burden, limiting purchases of costly military aircraft to reduce skyrocketing deficits.
Boeing currently ranks 27th out of 30 Dow components in performance, confirming a tough and unfruitful period for shareholders and the company. Sadly, it’s likely to get worse before it gets better because 2016 hasn’t signaled better economic times for most first world countries, including the USA, which may be headed into a period of job contraction.
BA Long-Term Chart (1993 – 2016)
The stock rose rapidly between 1993 and 1997 when it topped out near 60, at the same time the company issued its third stock split in ten years. That high signaled the start of an extended period of underperformance, with price easing into a broadening formation aka megaphone pattern that carved out a series of higher highs and lower lows over an eight-year period.
It entered a strong uptrend in April 2003 and finally cleared megaphone resistance in 2007. The stock topped out just four months later at 108 and sold off in a downtrend that accelerated to a 5-year low during the economic collapse. It bottomed out in the upper 20s in March 2009 and recovered into two rally waves that finally reached the 2007 high in June 2013.
A rally above multiyear resistance stalled at 140 in February 2014, giving way to a volatile pattern that yielded a final all-time high in the first quarter of 2015. That breakout failed quickly, yielding a two-legged selloff into new support near 100, marked by the 2013 breakout and 7-year rising lows trendline. The stock bounced strongly in February of this year but, so far at least, has failed to end the sequence of lower highs and lower lows that started at the 2015 peak.
BA Short-Term Chart (2014 – 2016)
Price action since late 2013 has generated two horizontal support levels, near 110 and 120. The August mini flash crash bounced at the upper line, which was broken when the February climax descended into the second support level. The subsequent recovery remounted both levels and then stalled at the 200-day EMA, which is still acting as strong resistance.
The descent off the February 2015 peak signals an intermediate correction that will confirm a secular downtrend if the stock breaks the two horizontal support levels and drops into double digits. The failure to mount the 200-day EMA in the last three months is waving a red flag because that level typically presents a major barrier for oversold bounces in active downtrends.
On Balance Volume (OBV) dropped to a multiyear low in the first quarter, pointing to active institutional distribution in line with a new downtrend. However, it’s come well off the corrective low in the last three months, lifting into the level posted right after the first 2015 selling wave (red line). This is bullish behavior, telling beaten down shareholders the stock should have a final opportunity to break the corrective pattern to the upside.
The Bottom Line
Boeing broke out above the 2007 high in 2013, but the uptrend deteriorated into a volatile sideways pattern that remains in force, more than two years later. The sequence of lower highs and lower lows since 2015 could signal a major downtrend lasting one to three years but accumulation off the first quarter low predicts that bulls will have a final opportunity to lift this former market leader out of the doldrums.
Boeing May Enter Long Downtrend (BA)
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