Boeing shares could rally 4% before hitting ceiling, chart suggests

Boeing is clear and ready for takeoff.

The plane maker is coming off its best week since January, the only positive Dow stock during Friday’s session as markets sold off. It managed to hold up against the U.S.-China trade sell-off, bucking its trend as a stock sensitive to escalating tensions.

Bill Baruch, president of Blue Line Futures, says Boeing’s troubles may be behind it.

“You’re talking about some of the worst being in the rearview mirror, and this is a resilient stock. … I do think these dips are buying opportunities. I’ve liked Boeing for a while,” Baruch said Friday on CNBC’s “Trading Nation. “

Boeing has told suppliers it will resume production of its 737 jets in February, depending upon regulators approving the 737 Max to fly again. The plane manufacturer has been struggling this year after the Max fleet was grounded following two fatal crashes in Ethiopia and Indonesia.

Boeing shares climbed nearly 8% last week, but Baruch says there may be some slight turbulence ahead for the stock into its earnings in late October.

“There is a parallel channel that it’s ping-ponging back and forth between. It recently jumped from $320. Now the resistance is near the $380 mark. I would expect that we see this continue to ping pong back and forth heading into earnings about two months away from now,” Baruch said.

Boeing shares were trading above $365 in Monday’s premarket, up 2.5%. They would need to rally 4% before reaching Baruch’s resistance target at $380. It last traded above that level in late July.

Still, Baruch thinks Boeing can ultimately gain altitude once it reports earnings.

“I do think the earnings report is going to be upbeat. Now, you’re seeing some of these analysts bring down their consensus, about 7.5% lower, and that could really open the door for better-than-expected news, and I think you have to position long Boeing until it breaks [below] $300, ” he said.

Steve Chiavarone, portfolio manager at Federated Investors, agrees and says investors have been focusing on the longer-term orders and the outlook for free cash flow.

“I think that’s why the name has held up as well as it has. Despite the 737 issues, there was always the sense if you can get past that, you’ve got some solid fundamentals — 787 cash flow generation, solid defense business, etc.,” said Chiavarone.

However, he also adds that not all of Boeing’s headwinds are behind it.

“I think the only thing you have to keep an eye on is with the ratcheting up of trade tensions again today, plane manufacturers are in negotiations for the largest wide-body plane order in the history of China, you have to make sure that that doesn’t get caught up here, but other than that, fundamentals look good. Hopefully, we can get this in the rearview mirror,” said Chiavarone.

Boeing generates the majority of its sales outside of the U.S., 14% of which stem from China.

Disclosure: Federated’s Global Allocation Fund holds Boeing shares.

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