Dow component The Boeing Company (BA) reported a blowout fourth quarter on Wednesday morning, beating EPS estimates by nearly $2.00, while revenues surpassed expectations by more than $500 million. The company also increased fiscal year 2018 guidance by a wide margin, with expected revenues approaching a staggering $100 billion. The bullish news triggered strong buying interest, lifting the stock to an all-time high above $350.

The market leader was already priced for perfection before the news and could have trouble sustaining upside in the coming weeks, despite the highly bullish results. Boeing already holds the number one slot in Dow component relative strength, raising the odds that little or no sidelined capital is available to support even higher prices. The news could even trigger a trend climax, ahead of a multi-month correction that shakes out weak-handed shareholders. (See also: Boeing Stock Is Losing Altitude Ahead of Earnings.)

BA Long-Term Chart (1990 – 2018)

A strong uptrend ended at a split-adjusted $30.94 in 1990, yielding broad basing action into mid-decade, when the stock broke out to a new high. That buying impulse topped out at $60.40 in 1997, giving way to a major decline that found support one year later at $29. It bounced along that level into the new millennium and turned sharply higher at the same time that big tech stocks entered their historic decline. Aggressive sellers emerged as soon as the rally mounted the 1997 high, triggering a reversal and failed breakout

The stock returned to three-year support in the upper $20s in 2001 and broke that price level in 2003, dropping to an eight-year low at $24.73. That print marked the lowest low in the past 15 years, ahead of a powerful trend advance that topped out in the triple digits in July 2007. A modest pullback accelerated during the 2008 economic collapse, but the stock held above the 2003 low, bouncing at late 1990s support once again.

The subsequent bounce took more than four years to reach the prior high, generating a 2013 breakout that stalled quickly above $140. Three years of sideways action at new support yielded a major uptrend after the November 2016 election, doubling the stock’s price into the fourth quarter of 2017. It added to gains into the mid-January high at $352.23 and settled into a holding pattern ahead of this week’s report. The monthly stochastics oscillator has been glued to the overbought level since the election, highlighting the historic ascent into market leadership. (For more, see: How Boeing Makes Its Money.)

BA Short-Term Chart (2015 – 2018)

The stock broke out to a new high in the first quarter of 2015 but failed the breakout in August, re-entering to persistent trading range. Aggressive sellers then took control, generating a range breakdown that hit a two-year low at $102.10 in February 2016. That marked a buying opportunity, with price remounting the broken range quickly and settling into a narrow consolidation, ahead of the fourth quarter breakout and trend advance. 

Bullish price action has not touched the 50-day exponential moving average (EMA) since May 2017 or the 200-day EMA since October 2016. This marks an extremely overbought and unsustainable technical condition, raising the odds for an intermediate correction lasting many months while exposing the stock to a decline that could penetrate $250. Monthly stochastics should offer useful timing information about that downturn, if it comes, entering a sell cycle through a bearish crossover.

A breakdown through short-term support at $333 would generate a sell signal, exposing downside into the 50-day EMA, currently rising from $305. A larger-scale decline could unfold if that level breaks, eventually filling the July 2017 gap between $214 and $224.  Conversely, the stock could work off overbought technical readings through time rather than price in a scenario that looks similar to the 2013 to 2015 pattern, carving sideways action that lasts for many months. (See also: The Top 3 Boeing Shareholders.)

The Bottom Line

Boeing reported impressive fourth quarter results, lifting the stock to an all-time high. However, extremely overbought technical readings could kick into gear at any time, triggering a reversal that cascades into a multi-month decline. (For additional reading, check out: Why Boeing Is All Set to Soar.)

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