Among broader market turmoil on Thursday, news struck that aerospace company Boeing Co (NYSE:BA) was facing an SEC investigation.
The bulls could have done without this news, as the stock’s intraday swoon further weighed on an already weak Dow Jones Industrial Average. At one point, BA stock was lower by about 12% on the day, which brought it to key long-term technical support.
The stock managed to bounce off those lows on a daily closing basis, offering active investors and traders an opportunity to play Boeing stock from the long side either using options or the stock itself.
According to Bloomberg, the SEC investigation in Boeing regards how the company accounted for sales and costs of its 747 and 787 Dreamliner aircraft.
The potential accounting irregularities were brought to surface by an internal whistleblower. News of accounting irregularities and SEC investigations are never a positive for a stock, but it can provide juicy near-term trading and active investing opportunities.
BA Stock Weekly Chart
Starting off with a multi-year weekly view, we see right away that BA stock topped out in early 2015 and developed a bigger topping phase throughout the year.
As 2016 arrived, Boeing stock accelerated lower along with the broader market; and thanks to Thursday’s selling pressure, it has now arrived at a big picture horizontal line of support. This line can be found across the major U.S. equity indices as well, as it connects the 2007 market top with the breakout area from 2013.
The S&P 500 has this horizontal line just south of the 1,600 level, and thus has not yet arrived there. Which is to say that BA stock may be somewhat ahead of the curve.
Note also that this horizontal area of support (former resistance) matches up with a 38.20% Fibonacci retracement of the entire rally off the 2009 lows up to the 2015 highs. This level of retracement often times is a first area, which either acts as longer-term support or at least as a good level to stage an oversold bounce.
BA Stock Daily Chart
On the daily chart, note that Thursday’s intraday recovery left another long tail behind, not entirely dissimilar to the one from last August.
Momentum oscillators such as the MACD fell to a lower low, which is to say that, technically, BA stock is even deeper near-term oversold than it was in August.
Not surprisingly, implied volatility of Boeing options rose in Thursday’s trading, providing option traders with juicy opportunities to sell out of the money puts or put spreads.
Alternatively, stock traders could look to enter partial long positions near Thursday’s close around the $108.50 area, using Thursday’s lows as a last-resort stop-loss area and a first upside price target at $116.50.
Like what you see? Sign up for our daily Beat the Bell e-letter and get Serge’s investment advice delivered to your inbox every morning!
You can also download Serge’s 2016 Market Outlook Report HERE
