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BREAKOUTS


A Nice Breakout For Boeing

04/30/07 11:19:28 AM
by Arthur Hill

A high-volume breakout and a new all-time high should keep the Boeing bulls happy in the coming months.

Security:   BA
Position:   Accumulate

A consolidation or a correction is quite normal after an advance, and this is the second breakout in the last 12 months. On the weekly chart (Figure 1), Boeing (BA) advanced from $61 to $88 and then corrected with a falling wedge. The breakout around $78 ended the correction and signaled a continuation higher. Instead of a correction, the stock consolidated after the advance from $72 to $92.50. The consolidation lasted over five months and the breakout signals a continuation of the existing uptrend.

FIGURE 1: BOEING, WEEKLY. BA advanced from $61 to $88 and then corrected with a falling wedge.
Graphic provided by: Telechart 2007.
 
The breakout appears valid because it occurred on strong volume and with a long white candlestick. On the daily chart (Figure 2), BA surged to resistance in March and then stalled for a few weeks. The stock then broke resistance with a decisive move on above-average volume. This shows a serious increase in buying pressure and there is nothing tentative about this move. In addition, note that on-balance volume broke resistance at the same time, and this further affirms buying pressure.

FIGURE 2: BOEING, DAILY. BA surged to resistance in March and then stalled for a few weeks.
Graphic provided by: Telechart 2007.
 
Where do we go from here? The consolidation extended from $85 to $92.50 (7.5 points), and my first upside target would be another 7.5 points from the breakout. This targets a move to around $100 or another 6%. The advance prior to the consolidation extended from $72 to $92 (20 points) and a similar advance from support ($85) would target a move to around $105. Taking the middle ground, I would set a target zone around $100-$105 and watch the price action should the stock reach this zone.



Arthur Hill

Arthur Hill is currently editor of TDTrader.com, a website specializing in trading strategies, sector/industry specific breadth stats and overall technical analysis. He passed the Society of Technical Analysts (STA London) diploma exam with distinction is a Certified Financial Technician (CFTe). Prior to TD Trader, he was the Chief Technical Analyst for Stockcharts.com and the main contributor to the ChartSchool.

Title: Editor
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Date: 04/30/07Rank: 4Comment: 
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