US Stock Focus A potential capitulation in Boeing

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By :  ,  Financial Analyst

Medium-term technical outlook (1-3months) on Boeing (BA)

Key levels (1 to 3 months)

Intermediate support: 320

Pivot (key support): 311.17/307.90

Resistances: 338, 354.80/361.45 & 386/394.40

Next support: 254/243

Key observations

  • During yesterday, 04 Apr European session, China made an announcement to counter U.S. proposed trade tariffs on China related products by a reciprocal US$50 billion tariffs on 106 types of imports from U.S. that include aircrafts. Boeing (BA) has a significant revenue exposure to the China aviation industry that saw its stock price plunged by 6% to test the 310 level in yesterday premarket session from its Tues, 03 Apr close of 330.82. Also, Boeing’s stock price has the highest weightage in the Dow Jones Industrial Average Index where its performance will have a significant impact on the general sentiment in the U.S. stock market.
  • From a technical analysis perspective, despite the on-going trade spate between U.S. and China, the primary uptrend for BA remains intact and yesterday’s price action has started to exhibit positive elements on its key major support zone of 311.17/307.90 (the pull-back support of a former long-term ascending channel resistance from Mar 2009 low & the medium-term ascending channel support from 18 May 2017 low).
  • The daily RSI oscillator has continued to post a bullish divergence signal since 22 Mar 2018 which indicates a slowdown in the recent downside momentum of price action. In addition, the on-going decline from its current all-time high of 371.60 printed on 28 Feb 2018 has been accompanied declining volume and at the end of yesterday, 04 Apr U.S. session, the price action of BA displayed a daily bullish “Marubozu” candlestick pattern coupled with a high volume reading versus its previous 5 days. These observations suggest a potential capitulation of the recent bearish move in place since Feb 2018.
  • Based on Elliot Wave/fractal analysis, BA may have completed an intermediate degree a/, b/, c/ of (4) “flat” corrective wave structure with a Fibonacci projection/retracement cluster found at the 307.90 level which is closed to the major graphical support of 311.17. Therefore, a potential significant reversal low may have been formed for BA for it to resume its bullish impulsive wave structure.
  • Key pivotal support to watch will be at 311.17/307.90 and break above 338 is likely to see a push up to retest its current all-time high zone of 354.80/361.45. A clearance above 361.45 opens up scope for a potential upleg to target the next resistance zone of 386/394.40 (upper boundary of the medium-term ascending channel from 18 May 2017 & a Fibonacci projection cluster). On the other hand, failure to hold above 307.90 shall invalidate the recovery scenario to kick start a medium-term corrective down move towards the next support at 254/243 (the primary ascending trendline from 19 Sep 2016 low).

Charts are from eSignal


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