While the bulk of the stock market trades near record highs, shares of Boeing trade nearly 30% off its all time high. Technically, the stock looks very bearish as the bears aim to push the price action below the $300 handle.
Fundamental analysis: Lowest order numbers in more than 30 years
Boeing has reported today the worst order numbers in more than three decades following the 737 Max catastrophe. The Chicago-based company announced it recorded 87 more cancellations than new purchases in 2019, while there is a backlog of 5,400 ordered planes.
Gross orders declined 77% to 246 in 2019, including canceled orders for three 787-9s and an order for a 787-8 model. As expected, Boeing failed to book orders for 737 Max, after the model crashed two times in five months.
“Recent developments suggest a more costly and protracted recovery for Boeing to restore confidence with its various market constituents, and an ensuing period of heightened operational and financial risk, even if certification of the MAX comes relatively near-term, as expected,” wrote Jonathan Root, Moody’s lead Boeing analyst.
For comparison, Boeing’s main competitor Airbus registered 768 orders last year, and it managed to deliver a record 863 planes.
To make things even worse, American Airlines announced today the decision to pull the Boeing 737 Max from its schedules until early June. Another major airline, United, announced the same decision earlier.
Boeing is yet to assess the full damage of the 737 Max crisis, although it has been reported that the aerospace giant has been losing around $1 billion a month. The company is due to report Q4 earnings on January 29.
Technical analysis: Symmetrical triangle broken
The price action trades in an apparent downtrend. The latest push lower has forced the stock to break the 12-month symmetrical triangle, which now trades below both key moving averages on a daily chart. The next target for the bears is August 2019 low of $319.
A more bearish scenario for the Boeing stock includes the test of the December 2018 low of $292, while the most negative scenario mid-term would be the completion of the symmetrical triangle pattern, which targets levels below $190.
For this to happen, the crisis around 737 Max would have to be prolonged beyond summer of 2020, in addition to a broader market correction lower. The market correction usually hits stocks that performed poorly first.
Boeing has reported the worst order numbers in more than three decades on the back of the prolonged 737 Max crisis. The next earnings call, scheduled for January 29, will provide us with more information about the financial implication of the crisis, however, the investors are bracing for more negative headlines.
If the 737 Max crisis drags on beyond the summer of this year, Boeing may hit levels below the short-term support of $290.