$BA – Boeing Co –  December 6th, 2021

Market Outlook:

Another week of high volatility saw equities decline significantly on Friday. Both SPY and QQQ moved 0.87% and 1.74% lower respectively but still managed to maintain above key support levels which is encouraging heading into this week. We have seen significant rotation into Utilities and Staples as defensive sectors provide protection against the broader market sell-off. Small caps suffered the most last week ending the week declining over 2% and back to the major $213 support level, once again falling to the year-long range between $213 and $233 which is concerning. Volatility in bonds was also high as TLT broke above the major $151 resistance level with strong momentum sending yields below the 137 basis point level. 

BA Bearish Trade Idea:
Our bearish trade idea today is Boeing (BA). From a macro and fundamental perspective, BA has been on the backfoot due to lack of travel demand caused by COVID as well as the grounding of the 737 MAX airliner due to safety concerns. While we do see the slight improvement in revenues and EPS trends recently, the timing of the new variant causing additional travel restrictions adds further pressure for aircraft demand. We also see Airbus gaining market share in the narrowbody category relative to Boeing. From a technical perspective, BA has broken below the $205 area of support and has failed to break back above it in recent days. Both 1M and 6M trends are bearish and with a technical score of 3 (out of 10), BA is a weak stock that will likely continue lower. 

As this is a credit spread, look to take profits at 50% gain and cut losses at 100%:

  • Take Profit: $4.17 Debit
  • Stop Loss: $16.70 Debit

Market Outlook:

Another week of high volatility saw equities decline significantly on Friday. Both SPY and QQQ moved 0.87% and 1.74% lower respectively but still managed to maintain above key support levels which is encouraging heading into this week. We have seen significant rotation into Utilities and Staples as defensive sectors provide protection against the broader market sell-off. Small caps suffered the most last week ending the week declining over 2% and back to the major $213 support level, once again falling to the year-long range between $213 and $233 which is concerning. Volatility in bonds was also high as TLT broke above the major $151 resistance level with strong momentum sending yields below the 137 basis point level. 

BA Bearish Trade Idea:
Our bearish trade idea today is Boeing (BA). From a macro and fundamental perspective, BA has been on the backfoot due to lack of travel demand caused by COVID as well as the grounding of the 737 MAX airliner due to safety concerns. While we do see the slight improvement in revenues and EPS trends recently, the timing of the new variant causing additional travel restrictions adds further pressure for aircraft demand. We also see Airbus gaining market share in the narrowbody category relative to Boeing. From a technical perspective, BA has broken below the $205 area of support and has failed to break back above it in recent days. Both 1M and 6M trends are bearish and with a technical score of 3 (out of 10), BA is a weak stock that will likely continue lower. 

As this is a credit spread, look to take profits at 50% gain and cut losses at 100%:

  • Take Profit: $4.17 Debit
  • Stop Loss: $16.70 Debit

Sector Rotation

The Relative Rotation Graph (RRG) for sector rotation indicates that there are 7 sectors in the Improving and Leading categories, and 4 sectors in the Weakening and Lagging categories

Leading (positive relative trend and positive relative momentum): Technology, Utilities and Real Estate. Utilities and Real Estate have strong increasing momentum and strength. Technology is showing signs of weakening momentum.

Improving (negative relative trend and positive relative momentum): 4 sectors are now in the Improving category namely, Energy, Health Care, Real Estate, and Staples – All are improving and showing an increase in momentum and strength.

Weakening (positive relative strength and negative relative momentum): Discretionary is weakening in both momentum and strength.

Lagging (negative relative trend and negative relative momentum): 3 sectors are in the lagging category – Industrials, Materials and Communication. All  3 are showing a strong decline in strength with some momentum picking up.

Market Observations

  • FDX – Price rebounded with strong momentum over the last 2 days providing evidence of a further rally to retest the $254 resistance level. A break above this level would open the door for further upside. 
  • PG – Broke above $147 resistance last week to close at new all-time highs on Friday. Look for a continuation of rally as rotation into Staples remains strong. 
  • DELL – Break above the $58 resistance level to new all-time highs is constructive for a continuation of its rally. 

More Innovation

Tony Zhang