Under normal circumstances, Boeing’s (NYSE:BA) business profile would be viewed as ideal. It had only one global competitor and they were both booked beyond their capacities for a decade. That made Boeing stock a monster performer.
And then it all came crashing down and in a sad way. Even before the pandemic started, the problems for BA stock had already been huge. There were two crashes involving manufacturer’s 737 Max model, resulting in an order to not sell any more of them. This put a severe crimp on its cashflow.
Then came March 2020 and the whole world came to a screeching halt. The airlines that are Boeing’s buyers stood overlooking the travel-shutdown abyss. People were not leaving their homes, let alone daring to fly. The industry collapsed and carriers went into survival mode. That meant that they were not buying planes.
That demolished Boeing’s profit-and-loss statement. But 10 months later, the worst is now behind it. The experts have their doubts but I’ve been consistently bullish on this stock and right about it. The moment for me came at the deepest part of the correction.
I have been writing about the opportunities for months and they have yielded great results. Today, I reiterate the same message with a few added lines to watch on the charts. One of those lines will be of special interest to the fans of the Boeing stock.
Boeing Stock Remains a BUY
When BA rose above $110 per share I thought it could reach $225. It did that twice already and now I am certain it will next top $300 per share this year.
The bulls are in complete control of Boeing stock, which might shock people to read this. In reality they are buying every dip even the one this week after a headline of another crash. Luckily it was not the 737 Max so the media is not harping on it. Perhaps they are busier with the political shenanigans and the fight between social media platforms and a large number of Republicans.
For Boeing, a lot has happened since the depths of the pandemic crash. What has been consistent in its stock is a series of higher-lows. Moreover, between June and November, it established a solid foundation near $180 per share. This gives the bulls confidence to know that they have footing just below them should they need it.
For that reason I’m a fan of buying dips for swing trade opportunities. And bucking the old adage to “not turn trades into investments,” in this case, I’d make an exception. Years from now I’m confident that Boeing stock will be much higher than the current price.
The day to get long BA was when President Trump said that the feds would help Boeing survive the pandemic. The airlines have since shored up their balance sheets so they are ready for their comebacks. My most recent two flights in December were on board of brand-new 737’s.
Even though the company doesn’t have the backlog it used to, it won’t take long to build it back up. Meanwhile, it most likely has enough inventory to expedite deliveries and bring in much needed cash. From a trading perspective this gives the bulls a tailwind. When a successful business has almost no competition, it makes it difficult to short the stock.
Trigger For Much Higher Prices
Technically, there is good news lingering just above current prices. When Boeing stock rises above $242 per share, I expect a large rally follow. It should extend to recover the ledge from which it fell in February of 2020. That is a lot of potential upside and the trigger is lurking around the corner.
The bulls reached for it twice in the last 10 months. There’s no reason they cannot do it again, especially when we know there is a lot of support below. Short term, the first hurdle sits near $208 per share. It has played a role this week, so the bulls will have to overcome it.
Barring a market-wide crash, this is the outcome I expect to happen this year. It would make sense to hold shares of Boeing stock, or use options instead. There, I can get long in the stock while leaving plenty of room for error. For example, I can sell the BA August $155 put and collect almost $10 for it. This is a trade that doesn’t need a rally to win. In fact the stock can fall 25% from here and it would still deliver maximum profits. If, for whatever reason, Boeing stock crashes, the break-even on this is $145 per share.
There are no sure things on Wall Street but the opportunity here is pretty close to it. The only way Boeing stock collapses for good is if we have zombies roaming the streets. The world needs airplanes and it’s either Airbus or Boeing.
On the date of publication, Nicolas Chahine did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Nicolas Chahine is the managing director of SellSpreads.com.