For Boeing and Johnson & Johnson: Where There's Smoke, There's Fire

When an American business icon becomes an I can't. As in, I can't invest in it any longer. Today it's not one, but two companies that fit this mold. Boeing along with Johnson & Johnson . It was less than a week ago, I dove into the charts of Boeing as well as the idea of the reversion to the mean trade against Airbus . Fast forward to today and we find that the bears now have control of the stock. A move below $370 was our yellow flag with a close under $360 the red one. With the stock trading closer to $350 than $360, bulls will have some work simply to get this picture back to a neutral view. There was no trigger on the long side as shares did now trade above $385, unless you were already long Boeing on Monday. And for those being long, if you haven't already hedged (hint: that's what yellow flags are for), then you have to be taking a closer look today. In terms of the reversion to the mean trade, it appears dead before it even started, especially since the thesis of that trade is in 2020, not 2019. News broke on Friday that instant messages between two Boeing employees from 2016 show the company may have misled the FAA in regards to the 737 MAX. The messages point directly to concerns around the MCAS anti-stall system, which is thought to be the cause of two tragic accidents. The dark clouds over Boeing just got a little darker. It's difficult to see the 737 MAX getting back in the air to kick off 2020 given this new information. And even if it does, is this a stock, a company you want to own at this point? Socially responsible investing has never been my forte, but as I discussed about SmileDirectClub earlier today, this situation throws into question management. If these messages are accurate, then Boeing was willing to risk lives, and eventually take them, in order to save a few bucks and get unsafe planes into the air. A similar argument can be made around the idea of owning Johnson & Johnson. The company has been fighting the claims that its talc contains asbestos, potentially causing cancer in users, and eventually leading to the death of sum. Fast forward to today and we have JNJ recalling around 33,000 bottles of baby powder after the FDA found trace amounts of asbestos in bottles purchased online. There are already 15,000+ cases filed against J&J for its talc, but I would expect this number to skyrocket after today's news. If you want to embolden claimants and attorneys, give them evidence from the FDA to use. If JNJ breaks below $127, we could see the dome breakdown and shares trade back to $120. The technical situation doesn't look as ugly as Boeing, but under $134, there's not much incentive to be long JNJ. It's difficult to envision the stock being able to simply shake off the recent news, and I don't think it should be able to. Yes, we're still an innocent until proven guilty society, but both of these cases scream where there is smoke there is fire. Both Boeing and JNJ appear to have made decisions in which the bottom line took precedent over what they stand for as a company: safe travel and health wellness. Even if the charts do start to look better, until the moral picture clears, the better question might be: should you own them? Until we have information that clears them, I say no. If you do own them, then I would look for alternative names or get December put protection at $350 for Boeing and $125 for JNJ. (Johnson & Johnson is a holding in Jim Cramer's Action Alerts PLUS member club. Want to be alerted before Jim Cramer buys or sells JNJ? Learn more now.)

For Boeing and Johnson & Johnson: Where There's Smoke, There's Fire

Both BA and JNJ appear to have made decisions in which the bottom line took precedent over what they stand for as a company.

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