The Stock of Boeing Has Climbed Above a Key Trendline, but is That Just a Bull Trap?

Boeing Co.'s stock has had its strongest week in over a year, gaining significant momentum and breaking above a year-long downtrend line. This rally has sparked optimism among investors, suggesting that the aerospace company may be emerging from its struggles, which included regulatory scrutiny over plane safety, labor disputes, and liquidity challenges.

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Adding to this optimism, Boeing's Chief Executive Kelly Ortberg reportedly reassured employees last month, stating, “we are at a low.” Such comments, combined with the recent stock performance, have fueled speculation that the company may finally be on the path to recovery. However, analysts warn that the broader context of the rally and its sustainability in the longer term should be carefully evaluated before assuming a breakout is in motion.

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As of midday trading, Boeing's stock had climbed 1.1%, reaching its highest level in over three months. Over the past week, it surged 10.2%, marking its best weekly performance since late July 2023, when it gained 12.7%. This week’s rally also pushed the stock above a trendline originating from its near four-year high in December. This trendline had capped gains through July 2024 and provided resistance earlier in December.

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For technical analysts, breaking a trendline is often a key indicator of a potential shift in a stock’s direction. However, shorter-term trends, like the current rally, are often influenced by longer-term patterns, which remain bearish in Boeing’s case.

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According to Ari Wald, head of technical analysis at Oppenheimer, Boeing’s recent rally appears to be a "bull trap," or a false bullish signal, rather than a true breakout. Wald highlights the importance of the 200-day moving average (200-DMA), a commonly used metric to assess a stock's longer-term trend. For Boeing, the 200-DMA currently sits around $170.58 and has been in steady decline since late February 2024. Moreover, the stock has not closed above this level since January 22, 2024.

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The continuous decline of the 200-DMA underscores that the overall trend for Boeing remains bearish. Wald noted, “The rally into the falling 200-day average can be considered a countertrend rally in a downtrend that should be sold, based on our work.”

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Wald also emphasized the importance of evaluating Boeing’s performance relative to the broader stock market. While he maintains a bullish outlook on the overall market, he cautions that Boeing's stock may not keep pace with broader gains. The adage "a rising tide lifts all boats" may provide some support for Boeing's share price in the coming months, but its long-term underperformance relative to the S&P 500 remains a concern.

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On a relative-strength weekly chart comparing Boeing to the S&P 500 index, the stock is only a month removed from a 24-year low. It also remains below a key level it breached in August 2024, which was previously set in May 2022. Wald believes this August breakdown is still intact, making the recent bounce more likely a temporary countertrend rally than a sustainable recovery.

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Given the long-term downtrend and continued underperformance against the broader market, Wald sees better investment opportunities elsewhere. His analysis suggests that while Boeing’s stock may see some short-term gains, it is unlikely to deliver consistent outperformance. He remains inclined to sell the stock during rallies, viewing the recent uptick as a momentary countertrend bounce rather than the start of a prolonged upward trajectory.

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In summary, while Boeing's stock rally has brought some optimism, analysts urge caution. The company still faces significant challenges, and its recent performance should be viewed within the context of longer-term bearish trends and relative weakness compared to the broader market. For investors, this means carefully weighing the risks and potential rewards before committing to the stock, as the road to sustained recovery remains uncertain.

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