Boeing Stock and Its Line in the Sand

Remember the old Bugs Bunny cartoon with Yosemite Sam where Bugs would dare Sam to step over a line and then he would draw another line and another one until eventually Sam stepped off the side of a mountain? That is what Boeing’s (NYSE: BA) weekly chart reminds me of. Only in this case the line isn’t moving; the stock just keeps toeing the line.
If we look at the daily chart first, it doesn’t look like there would be much reason to consider buying the stock. Sure, Boeing stock hit the $115 level as it did on that weird day in August, but does that give you the confidence to buy the stock? Yes, the oscillators are just coming out of oversold territory, but that still isn’t enough to make me a bull on Boeing.

When we step back and look at the weekly chart, now we see some things that make me think that Boeing rallies in the coming months. The description of the cartoon I gave in the introduction now makes more sense I hope. Look at how many times the stock has danced around the $115 level over the last two years. If we count the last two weeks, we are looking at five times in the last two years that the stock has toed the line, but never closed a week below the line.

The weekly slow stochastic readings just made a bullish crossover, which is encouraging. The 10-week RSI is in oversold territory for the first time since August 2011.
If you look back to July 2014, you see a similar pattern between the oscillators, with the stochastics making a crossover while the RSI was close to oversold. Once the stock reversed, it went from the $115 area all the way up above $155 around 6 ½ months later. I can see a similar move this time around.
The sentiment toward Boeing stock is mixed, with the short interest ratio at 4.55 and 15 analyst “buy” ratings compared to six “holds” and two “sells.” I usually look at a short interest ratio of 5.0 or more as being bearish, so in this case it is close but not quite there.
The short interest has been growing in recent months. The analyst ratings are pretty average, as most blue chip companies have approximately two-thirds of the ratings in the “buy” category.
I think Boeing rallies over the next six months or so. I would look to buy it under $125 and then set a target of $150 at the very least. At the current price this would give you a 25% gain.
I would also set a stop-loss at $110, as that would be a clear sign that the support in the $115 range has been broken. At the current price, this would represent a loss of just 8.3%. So based on the target price and the stop-loss point, this gives you a reward-to-risk ratio of 3-to-1. I can live with that.

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