After Southwest Airlines (NYSE 🙂 agreed to purchase an additional 100 Boeing 737 MAX jets earlier this week, shares of the aerospace giant took flight. On Monday, Boeing (NYSE 🙂 closed nearly 3% higher, pushing the position it is listed on to a new record even as it fell 0.3%
The new orders brought the total number of aircraft Southwest purchased from Boeing to 350, with an option to purchase an additional 270 aircraft. As part of the reconfiguration of this previously problematic model, Boeing has also improved the jet's fuel efficiency, which is expected to increase demand as the improvement makes it worthwhile for airlines to retire older jets more quickly.
To this end, Alaska Air Group (NYSE 🙂 announced on Tuesday that it had changed an existing deal with Boeing and will now purchase an additional 23 737 MAX aircraft.
Likewise, Boeing is benefiting from the reflation trade as economies reopen and travel and business activities accelerate.
However, based on the technical chart, it might be reasonable to infer that "informed money" has already built up positions, perhaps in anticipation of good news.
Boeing's stock fell within an overloaded range after jumping 30% higher in the single week leading up to the falling flag. This has temporarily pushed the stock above its bullish channel since the bottom of March.
The profit taking that followed flooded the market with stocks, but the decline that occurred then did not match the intensity of the previous rise – by no means. The dip was slow and incremental, supported by high demand.
So who made the purchase? New, random bulls that missed the previous wave or perhaps an inner circle of individuals connected to the people involved in the increased order flow?
Of course we don't know. But then it really doesn't matter.
Ultimately, we expect the same market persecution from now on. Demand outstripped supply, prompting buyers to look for new sellers at even higher prices. This cycle will continue, creating a technical snowball effect that is likely to push the price out of the current upward channel into a steeper trajectory.
Trading Strategies – Long Position Setup
Conservative traders should wait for the price to close above Tuesday's high wave doji to knock out the resistance, then prices must stay above the flag for at least three days before risking a long position.
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Moderate traders would buy the potential dip of a return movement.
Aggressive traders could enter at will, after accepting the higher risk as the price for their expectation of higher returns, as they try to capture a trade before it leaves (in case there is no withdrawal), rather than waiting for confirmation. As always, money management is essential.
Here's an example:
Trade Sample
Admission: $ 250
Stop Loss: $ 240
Risk: $ 10
Target: $ 280
Reward: $ 30
Risk: Reward Ratio: 1: 3
