This morning Boeing (BA) basically told us they can't provide much guidance in terms of expectations for earnings, but they aren't going out of business any time soon.
Alright, so maybe that's not exactly what they said, but it is a quick and dirty takeaway from the company's earnings report. Boeing missed on both the top and bottom line and saw its backlog shrink a bit as no orders developed for the 737 MAX after the Ethiopian Airlines crash. Management announced new guidance will be issued at a later date although they did note backlogs stood at $487 billion. The company's cash position remained strong at $7.7 billion with operating cash flow of $2.8 billion. Additionally, $1.2 billion in dividends were paid.
Judging by the fact the stock is slightly higher this morning, the market must have been expecting news that was much worse. Usually uncertainty like the refusal to provide guidance is a bearish trigger, so when the market reacts in the opposite manner traders have to be careful not to be quick to overreact. The longer the stock remains green, the less likely the typical reaction (a bearish move on a miss and no guidance) will occur.
I grabbed the daily chart I outlined back on March 11 on Real Money. I've made no changes to the support and resistance lines I placed on the chart six weeks ago. Almost without fail, Boeing has consistently traded within the boundaries of the anticipated consolidation channel. We did see a late March breakout attempt, but the 50-day simple moving average acted as additional resistance. Based on what I've seen, this is still the game to play. Buy into support around $365, sell into resistance of $385, and if the stock breaks above $385 look for a quick long-side trade into the 50-day simple moving average.
Should we trade above the 50-day SMA or below $362.50, then all bets are off. I imagine Boeing will fill the gap once it closes above the 50-day SMA in the same way I envision a move to $330 if support fails. I'm not inclined to buy here because we are so close to resistance, but nothing about this action screams short. It is a frustrating "wait for more information" in the form of price position.
In terms of the longer weekly view, I find a much wider trading range with the 10-week simple moving average acting as resistance and the 21-week simple moving average acting as support. These actually provide a tighter trading range than what we see on the daily chart, but remember this is based on weekly closes. It filters out a bit of the day to day noise. Secondary indicators are split bullish and bearish in terms of volume and momentum.
Again, I conclude the same: why here? why now? Whether you are a bull or a bear. The updated guidance, whenever that comes, will be the next big catalyst. Until that time, I'd opt to use the technical setup for triggers since we'll be lacking additional fundamental information for an unknown amount of time.
http://bit.ly/2IBbSHq
April 24, 2019 at 10:12PM
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