Boeing‘s bounce may not help the stock.
Boeing caught a break Tuesday, climbing over 2% after plummeting 10% in the previous two sessions. Its stock continued to rise in Wednesday’s premarket despite a disappointing earnings report.
Matt Maley, equity strategist at Miller Tabak, says the relief rally won’t last as the airplane maker contends with the fallout of the 737 Max grounding.
“It’s not a surprise to me that it is bouncing today,” Maley said on CNBC’s “Trading Nation” on Tuesday. “You look at its RSI [relative strength index] chart. It was getting quite oversold on a very short-term basis, and at the same time, it was testing the bottom end of a symmetrical triangle pattern.”
The chart fell below 30 earlier this month. The momentum measure points to oversold conditions when it falls below the 30 threshold. Maley guesses short-term traders used the opportunity to pull some money from short positions, but while these uncertainties persist, he thinks Boeing shares could still be heading south.
“It wouldn’t surprise me at all that once it works off that oversold conditions it rolls back over, and if it breaks below that pattern, it could be a quick move down to the $300 level, which was the December lows,” he said. “Unless we get some other catalyst between now and then, I’d want to hold off on buying in any significant way.”
Boeing also announced Tuesday that the head of the company’s commercial airplane unit, Kevin McAllister, will be leaving the company amid the 737 max crisis. He is the most senior executive to depart following two fatal crashes of the plane.
Quint Tatro, president of Joule Financial, agrees with Maley and says investors need to tread lightly around the stock. On a fundamental basis, he says, it looks like the stock is offering value but it could be more a value trap.
“It’s a wolf in sheep’s clothing. You’ve got the 737 issues that are still looming, but you also have to remember, this is a huge China trade risk. Everything is ‘Kumbaya’ right now, but as we know that could change with a tweet or just a headline,” said Tatro.
Tatro says the stock is a “no-touch” until those two issues get resolved, but he offers some guidance to Boeing investors.
“If investors are holding it long term, they like the dividend, I think they can use some puts to at least give themselves some insurance here,” he said.