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DOUBLE TOPS


Boeing Tests Key Support

11/13/07 08:19:36 AM
by Arthur Hill

Boeing formed a large bearish reversal pattern over the last five to six months, and key support is at hand.

Security:   BA
Position:   Hold

On the daily chart, Boeing (BA) traced out a massive double top that extends from June to November (Figure 1). Double top resistance resides at 107 and there is a support zone around 92–94. The stock formed two equal highs and tested support at least five times since June. A break below this support zone would confirm the pattern and target further weakness toward 77. It ain't broken until it's broken, and this pattern is not bearish until confirmation.

FIGURE 1: BOEING, DAILY. Boeing traced out a massive double top that extends from June to November.
Graphic provided by: TeleChart 2007.
 
There are also two shallower peaks on either side of the double top. If it is added to the double top, then a complex head & shoulders reversal pattern takes shape. The two peaks at 107 represent a double head and the two shallower peaks are the shoulders. Support is the same and a break would be just as bearish.

Turning to the weekly chart for some perspective, we can see the significance of support at 92 (Figure 2). This level acted as resistance in November 2006 and the first quarter of 2007. Boeing (BA) broke resistance in April and this level turned into support. A break would be bearish and you can see the downside target (77) on this chart. The rising 200-week moving average also acts a target in this area.

FIGURE 2: BOEING, WEEKLY. Boeing broke resistance in April and this level turned into support.
Graphic provided by: TeleChart 2007.
 
Figure 2, a weekly chart, shows slowing long-term momentum. The moving average convergence/divergence (MACD) peaked in early 2007 and formed a lower high this summer (red line). A negative divergence formed and the indicator moved into negative territory in November. This is the first move into negative territory in a year, and the bulls need an upturn in momentum to save a support break.



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.

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