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One stock failing to fly higher Tuesday was Dow Jones constituent Boeing Co ( BA ). And with a deteriorating technical forecast, bears may consider strapping in for lower prices using a well-placed Boeing stock vertical spread.
Initially, stronger-than-forecast sales, and a rare but modest one-time on profits of $1.84 imbued bulls to rally Boeing stock by around 3% to its best levels since early January in the immediate aftermath.
Since announcing mixed results late last month, investors have encountered round-trip trading conditions sprinkled with a bit of turbulent volatility in Boeing stock.
Initially, stronger-than-forecast sales, and a rare but modest one-time earnings miss on profits of $1.84 imbued bulls to rally Boeing stock by around 3% to its best levels since early January in the immediate aftermath.
But over the past month, enthusiasm for shares of BA has been replaced by more bearish action amounting to a round-trip of sorts. In fact, Boeing stock has shed roughly 7% since the report and undercut its pre-earnings low.
Much of the pressure appears tied to worry of slower-than-expected sales growth for Boeing's costly flagship 787 Dreamliner aircraft in an environment that Barron's described as an industry supply glut in a cover story this past week.
As much, BA investors have been increasingly concerned of future "one-time" write-offs tied to nearly $30 billion in deferred costs still unaccounted for and related to the Dreamliner aircraft.
And now Boeing stock investors face another challenge - deteriorating technical conditions.
BA Stock Weekly Chart
Click to Enlarge Since forging a modest base breakout in early 2015 to all-time-highs, Boeing stock has been in a down-channel defined by a series of lower lows and a recently completed second lower high.
The BA weekly chart suggests bears are in good shape to position against weekly chart resistance further supported by a failure at Boeing stock's 200-day simple moving average.
The key long-term bull/bear territory line kept BA bulls in check, excluding the session immediately following the company's earnings report - and reinforces the bearish argument in Boeing stock.
Looking forward, I'd set an intermediate downside target zone of $90 to $100, which amounts to combined technical testing of Boeing stock's channel support line, 50% retracement level and 2016 low.
BA Stock Bearish Vertical Strategy
Reviewing Boeing stock's options, one spread that fits in nicely with an evolving downtrend is the August $125/$115 bear put vertical for $3 or less.
For $3 per spread, the trader has a max payout of $7, or return of 233%, if Boeing stock is below $115 at expiration.
Granted, a move below $115 is roughly 10% from the current Boeing stock price. But within the technical framework discussed, the price objective is reasonable looking on the price chart, as denoted by "X" at the max payout level in mid-August.
Additionally, if shares of BA begin to decline sooner rather than later, profits can begin to accrue immediately.
Lastly, a spread like this Boeing stock vertical offers reduced Greek risks. Bottom line, in the event BA begins to fly higher, that's a nice insurance policy to have as the damage is minimal and no black box analysis is required.
Investment accounts under Christopher Tyler's management do not currently own positions in any of the securities or their derivatives mentioned in this article. The information offered is based upon Christopher Tyler's observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. For additional market insights and related musings, follow Chris on Twitter @Options_CAT .
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The post Boeing Co: Profit From BA Stock's Tailspin appeared first on InvestorPlace .
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
