"Without
resistance there is no growth."
-- Christina Nikolov
Will The Turbulence Subside?
by
Christina Nikolov, Founder ChartWatchCentral
Stock/Ticker: Boeing Company. (BA)
Date: February 18, 2003
Opinion: Bullish
Current Price: $30.00
Target Price: $35.00
Commentary:
Over the past 11 months, Boeing (BA) surrendered more than 40% of it's market value and is sitting within a few points of a fresh eight year low. Coincidentally, the shares are now fetching the same price as they were in June and July 1990. (Chart #1) So much for the buy and hold school of thought.Even though our analysis indicates potential downside to $23.50, we think the shares are close to a bottom and the upside potential far outweighs any downside risk. Want proof? On a quarterly basis, BA was this oversold (using the stochastic oscillator) three other times since 1987. Every one of those events preceded significant rallies. (Chart #4)
Another sign that these shares could be nearing a bottom is the lack of positive sentiment among Wall Street's prognosticators. Of the fifteen analysts who follow BA, only 15% have a positive opinion. And over the past month, the average earnings estimate for 2003, 2004 and 2005 has been slashed by 10%, 22% and 20% respectively.
Significant support resides near $28.50. If that level is undercut, additional support can be found at $27.40, $26.18, $24.87 and $23.50, with $27.40 and $24.87 probably being the stronger of the four.
While we expect BA to reach $36 over the next few months, it won't be an easy trip. There is a three month downtrend near $34. Meanwhile, the 200-day moving average and 18-month downtrend offer double-barreled resistance just above $36. (Chart #2, #3)
If you would like to purchase an option in anticipation of a rally, consider the January 20 call (symbol: LBOAD), which is currently offered at $10.80. If that option is to pricey for you, we also like the August 22.50 call (symbol: BAHX) and May 27.50 call (symbol: BAEY), which are going for $8.30 and $3.90 respectively.
Note: Before you write off the more expensive option, in favor of cheaper and riskier options, please consider the following: We wrote a negative commentary about Merck & Co. (MRK) on January 6th. When MRK fell 13% over the next three weeks, the January 2004 65 put (then trading at $10.30) rose 38%.
Chart(s):
#1) Boeing Company (BA) - Fourteen Year Weekly Chart
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#2) Boeing Company (BA) - Two Year Daily Chart
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#3) Boeing Company (BA) - Twelve Month Daily Chart
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#4) Boeing Company (BA) - Twenty Year Quarterly Chart
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