Chart of the Day: Demand for the 737 MAX has revived Boeing shares - nothing short of a miracle.
22 / March / 21 Visitors: 206 ★★★★★
This week, Southwest Airlines (NYSE: LUV) decided to acquire another 100 Boeing 737 MAX aircraft, which saw shares in the aerospace giant soar. Boeing (NYSE: BA) closed up nearly 3% on Monday, pushing the Dow Jones Industrial Average (of which it is a component) to a new all-time high. In comparison, the S&P 500 benchmark fell 0.3%.
New orders have raised the total number of Boeing airliners purchased by Southwest Airlines to 350 (and the airline could add 270 more aircraft to its order book). As part of the reconfiguration of its problematic model, Boeing has also reduced fuel consumption, which is expected to increase demand for the aircraft, as the improvement will encourage airlines to actively decommission old liners.
For example, on Tuesday, Alaska Air Group (NYSE: ALK) announced it was adjusting its deal with Boeing, increasing its order for 23 737 MAX aircraft.
In addition, reflation provides additional support for Boeing shares; economic activity is growing, and with it the demand for tourist and business travel.
However, the technical picture suggests that knowledgeable market participants may have already taken the good news into account in their positions.
After a 30% jump in just one week (which temporarily pulled Boeing out of the bullish channel), stocks formed a downtrend, with high candle density within the pattern.
The ensuing profit taking flooded the market with shares, but the pullback was less intense than the upward movement. The decline was slow and gradual as supply was absorbed by strong demand.
But who bought it? New bulls who missed the previous surge, or insiders aware in advance of changes in the company's order book?
We don't know the exact answer, but it doesn't really matter.
Ultimately, we expect a classic reaction from the market. Demand exceeded supply, forcing bulls to look for new sellers at ever higher levels. And the cycle will continue, accumulating positions like a "snowball", which is likely to push the price out of the current upward channel and put the stock on a steeper trajectory.
Buy trading strategies
Conservative traders should wait for the close above yesterday's high wave candlestick; You can protect a position from a potential trap using a time filter, i.e. the price should spend at least three days above the broken resistance.
Moderate traders will buy back the potential pullback.
Aggressive traders can enter a long position now, taking on the additional risk of trading without confirming the pattern in an effort to “outperform” the market. As always, “money management” is of particular importance.
Example of an aggressive stance
Entrance: $ 250;
Stop Loss: $ 240;
Risk: $ 10;
Target: $ 280;
Profit: $ 30;
Risk to reward ratio: 1: 3.