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Alan Farley
Boeing 777

Dow component Boeing Co. (BA) is trading lower by more than 8% in Monday’s pre-market after a 777 jet blew an engine and dropped debris on a Denver neighborhood. The jet landed safely after the incident, prompting the carrier to remove the planes from service.  The Federal Aviation Administration has ordered inspections on all aircraft with similar Pratt & Whitney engines manufactured by Raytheon Technologies Corp (RTX), who also fell after the news.

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Boeing Takes Quick Action

Boeing acted quickly, telling other airlines flying the Pratt-equipped 777 to also ground their fleets. The United States and Japan had 128 of those jets in service at the time of the incident. The quick response contrasted sharply with the 2019 Ethiopian 737-MAX crash when former CEO Dennis Muilenberg initially refused to ground the airplanes and called former President Trump to stop the FAA from taking action.

The news could impact investor sentiment and passenger confidence following the recertification of the MAX in the fourth quarter of 2020. Southwest Airlines Co. (LUV) just announced the troubled jetliner would be back in service on Mar. 11 while Boeing recently reported modest improvement in its January order and delivery update, raising hopes the aerospace giant was finally putting the crash and the pandemic behind them.

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Wall Street and Technical Outlook

Wall Street consensus stood at a ‘Hold’ rating ahead of the news, based upon 9 ‘Buy’ and 8 ‘Hold’ recommendations. More importantly, four analysts recommend shareholders close positions and move to the sidelines, despite the MAX recertification. Price targets currently range from a low of $165 to a Street-high $307 while the stock is set to open Monday’s session nearly $25 below the median $235 target. It’s hard to gauge what impact the weekend events will have on ratings.

The stock carved a massive double top pattern between 2018 and February 2020, with support at 292. It broke down on heavy volume during the pandemic decline, hitting a 7-year low at 89.00. A three-legged recovery stalled below the Mar. 9 continuation gap in December, which has narrowly aligned with shallow Fibonacci retracement levels.  It’s currently trading below the 200-week moving average, oscillating across the 50-week moving average, indicating the secular downtrend remains fully intact.

For a look at all of today’s economic events, check out our economic calendar.

Disclosure: the author held no positions in aforementioned securities at the time of publication. 

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