Technical Analysis

Case Study:
Boeing (BA)

Boeing followed a steady upward trend from March 2003 through September 2007. Should we have been able to see the reversal in time to get out of the stock before it lost almost 60% of its value?

[A] In April 2007 we were sitting on the long term support line. [B] By June 21 the price is back on the support line.by June 25 the price breaks through the support. Several trading days later it clambs back above the support line, but on low volume. [C] At then end of July and beginning of August 2006 we have a number of high volume days with no real gains. We see sideways movement and, on August 8 Boeing once more tests the support level. [D] Boeing breaks through the support level on high volume. Both August 10 and August 16 are roller coaster rides as the stock drops on high volume. This might be a good point to get out. The stock is now at $92 [E] The stock recovers and climbs back up to the support level. But it cannot break through. This is the key signal that the stock is unable to continue in its upward trend and is transitioning to a downward trend. The stock is now at $107. [F] By the end of November 2007 the stock is at $88 and by the end of November 2008, Boeing traded at $40. The key is to trust your instincts. A chartist might have gotten out at [B] and watched in dismay as the stock then climbed to $107. A chartist might have gotten out at [D] and watched in dismay as the stock climbed to $107. By [E] the signs were unmistakeable. While it would have been wonderful to get out right at the high of $107, the key point is that the chartist got out before it went to $40.