Boeing May Lose Some Altitude

 | Sep 08, 2013 | 12:00 PM EDT
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Like many securities in recent weeks, aerospace giant Boeing (BA) has started to display signs of exhaustion. In 2008, after five years spent in a strong bull market, Boeing investors were hit hard. The shares fell from above $100 to below $30 in just over a year. Nevertheless, over the next five years, the bulls reemerged.

This summer, Boeing shares hit an all-time high, but the bulls are not in the clear. Those highs correspond to the zone of highs Boeing struck just prior to its 2008 free fall. Should we now be concerned that history will repeat itself?

At the stock's current levels, there are reasons to hold off on establishing large investment positions in Boeing. There are also reasons to play the shorter-term price action on the downside. Major market highs themselves, however, tend to take time to develop. Resistance levels can be tested and retested a number of times over months before a true price correction begins. Boeing's shares may very easily still see new 52-week highs before the end of the year. In the meantime, let's look at Boeing from the technical side.

On the monthly time frame, the resistance zone currently striking is quite obvious. The 2007 peak in Boeing is easier to spot than the summits of most major mountain chains. It also corresponds to other technical levels of resistance -- for example, pure trend exhaustion. By forming both an inverted "V" pattern at the 2007 highs and the 2009 lows, the monthly chart for Boeing suggested that it would have the possibility of falling into a longer yearly trading channel. These types of channels often experience two major waves of upside or downside as they develop.

Source: TradeStation

Boeing had experienced a period of congestion between 2010 and early 2013 that had followed the initial recovery in 2009 and early 2010. The breakout from that channel was the second major monthly trend on the upside. As the 2007 highs approached, so did the 100% expansion level on this year's breakout, as compared with the 2009 rally. The upside momentum has already started to slow into this monthly resistance zone.

Dropping down to the daily time frame also sheds light on the larger-time-frame price action. The slowdown into the monthly resistance zone becomes more apparent, and Boeing is even developing a potential swing trade on the short side. It experienced a two-wave correction off highs into mid-August, and has since developed a two-wave correction on the upside off support from $102, which struck on Aug. 15. A break lower out of the second upside move from Aug. 28, and onward into early next week, would trigger a swing trade for a multi-day move lower.

Source: TradeStation

Currently, the lower end of the channel on the 90-minute time frame is approximately $105.75, while $107-$107.50 is the current resistance level Boeing will struggle with heading into next week.

The $100 zone is the next major daily support zone. Dropping down to a 30-minute chart can further assist short-term traders in timing this downside continuation strategy. As we saw in the major indices in June, however, there is a possibility that even a strong short at that point in time could be followed by another test of the monthly highs.

While the bears may be taking the lead right now, this is a battle that is likely to play out further in the months ahead, and the bulls will not likely give up without a fight.

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