Boeing: Tighten The Bolts And Let’s Go (Technical Analysis)

Summary:

• Boeing’s fundamental analysis is difficult due to the company’s lack of profitability, high debt, and weak balance sheet.
• Our methodology has proven successful in analyzing Boeing’s stock in the past, predicting both upward and downward trends.
• The current analysis suggests that Boeing may have reached a major low and could potentially advance to new highs, despite skeptical views on its fundamentals.

By Levi at Elliott Wave Trader; Produced with Avi Gilburt

If you are in the market for a commercial airliner, there are basically two choices: Boeing (NYSE:BA) or Airbus (OTCPK:EADSY). It is not likely that the runway for demand in such products is going to diminish much in the near future. Does Boeing need to tighten up its processes and practices? Of course, and that is readily recognized. Can the company be reasonably analyzed and valued at this current moment? Not so easily accomplished as you will see in Lyn Alden’s comments below. However, we will take you on a brief trip back in history and show you the power of our applied methodology. Also, we will look forward to what is most likely to happen next. Ready?

The Current Fundamental Snapshot With Lyn Alden

I personally put BA entirely in the technical trading category right now because fundamental analysis is almost impossible.

The company’s profitability and free cash flow evaporated during the pandemic and the dividend was eliminated. In the years that followed, free cash flow only started to recover, earnings still haven’t, and now they face a variety of quality issues and downstream from that, branding issues. Even in the most bullish scenario, it will take years to regain enough profitability to support the current value of the company.

The company has filled the gap in profitability with a surge of tens of billions of dollars’ worth of debt, and the credit rating is down to BBB- which is barely investment grade. This means that even when or if profitability one day returns, the company will have a weaker balance sheet to rebuild.

With the exception of a small percentage of investors that have domain expertise, it would be very hard for outside investors to analyze the likelihood and timeline of a recovery of Boeing’s fundamental prospects. And thus I categorize it as a trading stock.

A Brief Preamble

Please indulge this quick tangent to set the table for us. Remember these basic tenets of our methodology that have been tested and proved time and again over the last 12 years that we have shared our work with the public. Markets typically advance in five wave structures and correct/pull back in three waves. Also, they are fractal in nature. Price will display self-similarity at all degrees of the chart as it fills in. These patterns repeat to form the larger structures. This is what gives Elliott Wave Theory its power and utility.

You may hear some affirm that ‘technical analysis’ only tells us what has already happened. From much prior experience and study we can share with you that we have not observed this to be the case. Since these patterns repeat, they also provide us with context. There is not another methodology of which we are aware that can do this. Please allow me to elucidate further. Let’s take that trip back in time, some 12 years in fact to see a specific case study – here we go.

It Is Late 2012…

A few days ago, Zac Mannes and I had a conversation about this time period. Here’s what we found in our archives.

Late 2012 and early 2013 there were a bunch of battery fires on the new DreamLiner making the news. It was a fantastic early test case for StockWaves vs. ‘the news’.

Here is the original post as archived on our site from January 29, 2013.

Zac was able to identify what was likely a very important low struck in October of 2012. From that low, price had formed an impulsive structure up and was telling us that there was a high-quality setup in place for a longer term trade. How did that analysis play out? Let’s fast-forward to the next series of articles that were shared with the readership here at Seeking Alpha. Now, please keep in mind that (BA) was trading at $73 when Zac posted this back in early 2013.

Fast Forward To April 2019…

Zac then shared this article with the readership: “Stall Warning For Boeing And The Aerospace Industry“. In March 2019, price had peaked at $446, quite the climb from $73 back in 2013. Zac was able to give a clear warning at the $380 level, and did that ever turn out to be a prescient call! The same stance was reiterated in November 2019 with this article: “Holding Patterns For Aerospace And Price MAX For Boeing“. What happened next was nothing less than a nausea inducing nose dive. Price fell to $89 just a few months later.

But now please take a look at what was published as price began to rebound from that level. This article was published when (BA) was at the $95 level: “Boeing’s Nosedive: From Leading The Dow To Asking For A Bailout“. It was a clear case of a flip from outright bearish to now giving the stock a chance to regain some precious altitude. In a year’s time, price advanced to $280. At the mid-point of that period, this article was also shared with the readership that reiterated the bullish outlook: “Boeing And Aerospace: The Art Of Touch-And-Go“.

Great – That’s What Happened, But What’s Next for Boeing Stock?

OK, let’s talk about that. At any one moment we will have upwards of 50 specific stock setups in our ‘Wave Setups’, both long and short, with key levels of support/resistance as well as targets near term and longer. There are also price levels that either further confirm the setup or invalidate it. Here’s what Zac posted a few days ago regarding (BA):

Here are the two current charts also included with that post:

Note here on the daily time frame that we are anticipating (BA) to have put in a major low and could even potentially advance to new highs over time. Insert here the argument:

There is no way the fundamentals support that assertion.

Perhaps. But, recall that rarely do fundamentals lead the stock price. It is almost always sentiment that shifts first. Fundamentals tend to agree once the reversal and move back higher in the stock is already well under way. Now, take another look back at that 2013 time frame for possible confirmation of this scenario. Will history rhyme once again? We have seen this across countless charts. What will help us further solidify the scenario? Let’s zoom in closer:

The fractal nature of the markets lends us a hand here. Price has already formed what may be an initial 5 waves up from the low struck at $177. Should that low or higher hold, then this will give us more confirmation of our projection. If price falls back under $177 we will re-evaluate the near-term bullish scenario.

Honestly, We Understand The Skeptics

Are you skeptical of this methodology? Avi Gilburt will share with you his journey from a sideline skeptic to mainstream expert. Here is a small excerpt from one of his articles describing said journey:

While I was learning Elliott Wave on my own, I was trying to obtain a more ‘track-able’ and ‘tradable’ understanding of the fractal nature of the markets. This is probably what many struggle with the most. Specifically, it is when we say that within a 5 wave move, each impulsive wave breaks down further into 5 waves each, with some waves becoming extended.

Well, after much analysis and observation, I identified a standardized method to trade waves 3-5, once waves 1 and 2 were in place. Now, remember that this is a standardized method that is a most common phenomenon in the market, but markets can and do vary from this standardized presentation. In fact, when we deal with commodities or the VXX, often, we see extensions that far surpass the standardized extensions I present here. But, again, this scenario is seen very often in the markets and individual stocks, so I believe it is worthwhile to have a basic understanding of this structure to build upon.

This is something that I observed within the Elliott Wave structure, and have adapted it to a trading methodology, which I lovingly call Fibonacci Pinball.

Conclusion

There is so much more to this methodology if you are willing to devote a bit of effort and study to discovering a new way to approach the markets. Yes, there are nuances to the analysis.

There are many ways to analyze and track stocks and the market they form. Some are more consistent than others. For us, this method has proved the most reliable and keeps us on the right side of the trade much more often than not. Nothing is perfect in this world, but for those looking to open their eyes to a new universe of trading and investing, why not consider studying this further? It may just be one of the most illuminating projects you undertake.

(Housekeeping Matters)

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Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, but may initiate a beneficial Long position through a purchase of the stock, or the purchase of call options or similar derivatives in BA over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha’s Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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STOCK WAVES: Where fundamental analysis meets technical analysis for highest-probability investment opportunities! Get leading Elliott Wave analysis from our team, along with fundamental insights and macro analysis from top author Lyn Alden Schwartzer.

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