Boeing MAX Test Flight Triggers Fresh Buying Interest

Dow component Boeing Co. (BA) surged 14% off moving average support on Monday after initiating a series of recertification flights for the troubled 737-MAX jetliner. Those test flights, which will last for three days, are being closely monitored by the U.S. Federal Aviation Administration (FAA). As the flights began, the FAA reminded the public that they will lift the no-fly order “only after we are satisfied that the aircraft meets certification standards”.

However, reality struck home just before the NYSE closing bell when Reuters reported that Norwegian Air had cancelled 97 orders that included 92 737-MAX jetliners. It also filed legal action against the company, seeking to recover pre-delivery payments due to their negligence in crashing two planes. This type of news keeps plaguing upbeat reports about recertification, raising doubts about Boeing profits and revenues through the second half of 2020.

Boeing Bearish View

Bernstein analyst Douglas Harned reiterated their bearish view on the stock in a research report last week, noting, “we have seen potential for a recovery from Covid-19 as dependent on a medical solution to bring global travel levels back to normal.” He finished with a highly skeptical outlook that “based on our assessment of the traffic outlook, combined with analyses by Bernstein’s health care team, we believe the solution is farther out.”

Wall Street And Technical Outlook

Wall Street consensus has missed the mark since the grounding in March 2019, maintaining ‘Buy’ ratings despite evidence the plane would stay on the ground due to a toxic corporate culture that culminated with the firing of CEO Dennis Muilenburg. Ratings have also held remarkably steady through this year’s plunge into double digits, with 7 ’Buy’, 6 ‘Hold’, and just 2 ‘Sell’ recommendations, even though the stock has underperformed the Dow Industrial Average for months.

Monday’s euphoric buying pressure stalled within 5 points of resistance at the psychological 200 level, which Boeing has struggled to mount for the last three weeks. The aerospace giant now hopes to resume commercial service sometime in the fourth quarter but supply issues, highlighted by this week’s Norwegian Airlines news, could hamper a return to profitability into 2021 or beyond. In turn, this makes the stock less attractive, even at the currently low valuation.

E-mini Dow Jones Industrial Average (YM) Futures Technical Analysis – Held Support Zone at 25053 to 24484

September E-mini Dow Jones Industrial Average futures are trading higher at the start of the week, led by a more than 500 point jump in the cash market. The blue chip average was supported by a sharp rise in shares of Boeing and Apple.

Traders for the most part ignored the latest surge in coronavirus cases and worries over U.S.-China trade relations. Their focus instead was on stocks that would gain the most if states continue to reopen.

At 20:11 GMT, September E-mini Dow Jones industrial Average futures are trading 25358, up 408 or +1.64%.

Shares of Boeing and Apple were among the biggest contributors of gains on the Dow, climbing 11.3% and 1.8% respectively. Boeing rose as certification flights for the Boeing 737 Max began Monday.

Daily September E-mini Dow Jones Industrial Average

Daily Technical Analysis

The main trend is up according to the daily swing chart, but momentum is trending lower. The main trend will change to down on a move through the nearest main bottom at 22640. A trade through 27466 will signal a resumption of the uptrend.

The minor trend is down. This is controlling the momentum. The minor trend changes to up on a trade through 26294.

The minor range is 27466 to 24409. Its retracement zone at 25938 is resistance.

The short-term range is 22640 to 27466. Its retracement zone at 25053 to 24484 is support. This zone stopped the selling at 24743 on Monday.

Short-Term Outlook

On the downside, the support is a 50% level at 25053, an uptrending Gann angle at 24624, a Fibonacci level at 24484 and a minor bottom at 24409. Look for an acceleration to the downside if 24409 fails as support.

On the upside, the first potential resistance is a downtrending Gann angle at 25674. Sellers could come in on the first test of this angle. Overcoming it, however, could trigger an acceleration to the upside with the next target the minor retracement zone at 25938 to 26298.

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