Boeing stock dropped over 12% on March 11th in the aftermath of the Ethiopian crash, killing all 157 souls on board.

This was the second 737 MAX-8 aircraft to crash in under 5 months.  On October 29th, 2018 the Lion Air 737 MAX-8 aircraft crashed in the Java Sea just 12 minutes after take off – killing all 189 passengers and crew.

The FAA initially allowed the 737 MAX 8 aircraft to continue flying, reassuring passengers of the safety.  However, the investigation shows a troubling similarity between both aircraft altitudes just after take-off.

The image below shows the similarities of the two flights’ vertical paths:

Boeing Vertical Speed Chart – Source: New York Times

 

Both planes have a very similar profile just 20 seconds apart.  Therefore, this is an indication there is a high likelihood of a common issue which is a massive safety risk.

All Boeing 737 MAX-8 aircraft are now grounded worldwide, leaving airlines with enormous losses of revenue and Boeing with a massive potential of liability.

 

Boeing Airframe Issue

I want to include a few Tweets from a pilot, with some fascinating commentary on this situation.

It is always best to seek input from the most intricately involved individuals, in this case the pilots themselves.

You can now see that this issue is actually very complex, and occurred due to a series of decisions that were made for the benefit of efficiency. Unfortunately for Boeing, this decision compromised airplane safety.

However, at this point, as investors and traders you are likely wondering about the answer to one big question.

Is Boeing stock a good buy right now?

 

Boeing Stock Technical Analysis

In this section I take a deep dive into the technicals on Boeing stock.

Fibonacci analysis applied to the 2019 rally shows support at:

  • $369.25 at the 50% Fibonacci level
  • $351.09 at the 61.8% Fibonacci level

Furthermore, the highest volume node on the profile is approximately $344, aligning closely with the average price level of the 2018 year.

On January 30th, Boeing announced earnings that beat estimates by 16.66% – igniting an enormous Boeing stock rally.

Looking at the bottom right chart, you will see that the 100 and 200 day moving averages are around $360.

 

Boeing Stock Technical Analysis

Boeing Stock Technical Analysis

On a weekly chart, Boeing stock price has increased from $102.93 to $377.93 (267%) since February 1st of 2016.  That is an enormous gain in 162 weeks.

Next, we apply Fibonacci confluence techniques to find the major weekly support level all the way down to $275.15 to $292.58.

If you want to learn how to do Fibonacci technical analysis click here >

Here is the Fibonacci confluence zone (orange) on Boeing stock weekly chart:

Boeing Stock Fibonacci Analysis

Boeing Stock Fibonacci Confluence

Therefore, even though Boeing stock is down significantly in the last few weeks the price has been increasing at a rapid pace over the last 2 years.

Overall, you can see a drop down to as low as $275 and still hold the bullish trend.

But when do you know it’s time to start buying Boeing stock?

 

Boeing Stock Could Drop More – If This Happens

The big question right now is whether this was a true accident, or if negligence was involved.

Aircraft manufactures are under enormous pressure to maximize profit for shareholders while not compromising on safety.  Development, testing and manufacturing aircraft worth hundreds of millions is a difficult business.

Hence, the question is did Boeing know about these mechanical issues before certifying and selling the aircraft?

If the answer is yes, there will be massive lawsuits against Boeing by airline companies that purchase the aircraft.  In addition, families of the killed passengers will also seek liability claims which could crippled Boeing with massive expenses. Insurance will not offset this cost if it was all due to outright negligence on Boeing’s behalf.

Under this scenario, Boeing stock will drop down to at least the $275 Fibonacci confluence support zone.

However, if the crashes are deemed to have occured due to improper pilot training by the airlines – Boeing’s big stock price drop may be over. In this scenario, you can expect airline stocks that own the 737 MAX-8 aircraft to see some strong selling.

Right now at the center of this entire situation is one question – were these accidents due to lack of training by airline operators or equipment failure on Boeing’s part?

If Boeing is at fault, and there is proof it is negligent behavior then the trouble is only starting.

However, if we can find a quick solution like a software upgrade to fix the hardware – the selling is likely over.

At this point, as a trader you need to be patient and wait to see more information coming out of the ongoing investigation in France.  Once more details surface, you will have a cleared picture on whether or not it is a good time to buy Boeing shares.