The Boeing Company
PowerRating) has been hit by more than its fair share of turbulence this year. The company has been plagued with numerous delays in regards to the completion of its new Dreamliner airplane.
Furthermore, weakness earlier in the year in the airline sector due to high oil prices wasn’t helping the company either. As a result, the security has dropped more than 52% since the start of 2008. However, investors are confident that the shares will soar in 2009, as they grab up more bullish bets on the stock. But is it too early to be calling an end to the stock’s woes?
Boeing is the world’s largest aerospace company. It is the No. 2 maker of large commercial jets, and the No. 2 defense contractor behind Lockheed Martin. Boeing has 2 major segments: commercial airplanes and integrated defense systems. Boeing’s commercial aircraft include the new 787 Dreamliner, 767, 747, and the next-generation 737; military aircraft include the F/A-18 Hornet, the F-15 Eagle, the C-17 Globemaster III transport, and the AH-64D Apache helicopter.
Boeing’s space operations include communications satellites, missiles, the International Space Station, and the Space Shuttle (with Lockheed).
From a technical perspective, the stock has spiraled lower from its July 2007 peak of $107.83, suffering a loss of more than 60%. The security has shuffled lower under its 10-week and 20-week moving averages during this time frame. While the equity has bounced more than 3% higher this afternoon, its rally has been stopped cold by resistance at its 10-week trendline. BA has not logged a weekly close above both its 10-week and 20-week moving averages since the beginning of June.
Options players have shrugged off the technical weakness and are rushing to snatch up the stock’s call options in anticipation of a rally in the shares. The Schaeffer’s put/call open interest ratio for BA stands at 0.50, as call open interest doubles put open interest. What’s more, this reading is lower than 95% of all those taken during the past year, indicating that options players have been more optimistically aligned toward the security just 5% of the time during the past 12 months.
Heavy call trading can also be seen on the International Securities Exchange (ISE). During the past 10 trading sessions, an average of 3.2 calls has been purchased to open for every 1 put purchased to open. This ratio of calls to puts is higher than 94% of all the readings taken during the past year, underscoring the growing optimism we are seeing toward BA.
Wall Street has yet to turn its back on the blue-chip stock. BA has earned 8 “buy” ratings, 8 “holds,” and 1 “sell.” Any downgrades from this optimistic group could send the shares skipping lower.
Furthermore, expectations are somewhat high for 2009 among analysts. The average 12-month price target for BA stands at $53.95, according to Thomson Financial. This estimate implies that analysts are expecting the equity to rally more than 30% during the next 12 months. Any price-target cuts from this pack of optimists could result in fresh selling pressure.
In summary, traders should keep a close watch on resistance at the stock’s 10-week moving average. A rejection at this trendline could shake loose some of the bulls, resulting in a sharp decline for the shares.
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