From the Desk of Ian L. Cooper
Boeing (NYSE:BA) didn’t have the greatest month.
Then again, neither did the victims, or their families.
In just two days, the stock lost 56 points on news that an Ethiopian Airlines flight crashed, sadly leaving no survivors. This came just months after another deadly crash involving the same model in Indonesia, which also left no survivors after five months ago.
The plane used for both was a 737 MAX 8 jet, one of the company’s top-selling planes.
Such horrific incidents only raise a lot of questions about a plan that generated 60% of the company’s $101.1 billion in 2018 revenue.
Especially after countries and carriers grounded their fleets of that plane.
Until the issue is fixed, trust in the company could take quite a hit – and rightfully so.
From an investing standpoint, there are those that want to go bottom-fishing, hoping that the massive decline was the worst of it.
However, now is not the best time.
In fact, Boeing is now considered a falling knife – a technical term for a stock in rapid decline.
As we all know, it’s never a good idea to even attempt to catch a knife as it plunges to the floor.
So, it’s best just to avoid it, immediate-term.
At the same time, we still want to watch the stock for potential entry points with patience.
What we need to see is agreement among our four key indicators, for one. That includes incredibly oversold conditions on Bollinger Bands (2, 20), MACD, relative strength (RSI) and Williams’ %R. However, in the case of a falling knife, we need to wait for more than just agreement among each of the indicators.
We need to wait to see where support will come into play, and whether or not that line of support will hold. We also need to wait to see if we get a sustainable new uptrend prior to buying.
Buy too early, and you could easily get cut by this falling knife.
Wait… and eventually, it will become an opportunity to buy on the cheap.