Triangle Breakout Play in Boeing BA Jan 8

Jan 8, 2010: 2:52 PM CST

For those who may have missed it, Boeing Stock (BA) broke to new recovery highs out of a rising wedge or ascending triangle pattern on the daily chart, sending prices higher in solid breakout mode.

Let’s take a look at the daily chart to see this breakout, as well as upper resistance levels to watch and lower support levels to guide traders.

Starting with the June 2009 price high of $52 per share, Boeing then moved into a rising consolidation pattern which is a hybrid between a rising wedge (traditionally bearish) and ascending triangle (traditionally bullish).

Instead of classifying consolidation patterns as ‘bullish or bearish,’ I recommend classifying them as simply consolidation patterns, and then playing the breakout in either direction in an attempt to capture a potential quick profit once price breaks either the upper or lower consolidation trendline (and placing a close stop stop  in the event of a trap… such as what happened with the false breakdown late October).

In this example, BA broke the upper trendline at the $57 per share level as volume and momentum surged to new (swing) highs, confirming the breakout and setting up a quick ‘go-long’ trade for those who saw this in real-time.

There still may yet be an opportunity to buy a pullback – should it occur – to the $57/$58 level, though any move under $54 per share (50 day EMA and trendlines) clearly would invalidate this as a horrendous bull trap.  Be careful if today closes as a doji (indecision/reversal) candle so far above the 20 day EMA – that’s just asking for mean reversion short-term.

Otherwise, upper targets include the “price projection” target (height of the pattern added to the breakout zone) which is $52 – $38 = $14.

If we add $14 to the $67 breakout, then we have a possible “classic chart pattern” target of $71.  There’s major overhead resistance to achieve that target, however.

Otherwise, let’s look to the weekly chart for other possible overhead targets and resistance levels.

We can see that the upper resistance level at the $56 price came from the 38.2% Fibonacci Retracement.

Once price solidly broke above this boundary, it set up an “open air” play to the 50% level at $65, which is now just $3.50 away – it is an obvious resistance level to watch.

The $65 level aligns with a prior price swing high (resistance level) in July 2008, so we have a Fibonacci and a prior price swing high confluence resistance level at $65.

Should price break that level, the 200 week simple moving average rests at $68.00 per share.

So I’m not sure the pure pattern target at $71.00 comes into play easily, or without pullbacks/retracement should that level be reached.

Even if you’re not trading it, this is an interesting pattern to watch.

Register Now to attend Corey’s three-session webinar “Price Principles to Enhance Your Trading Edge” – taking place next week, Tuesday – Thursday (January 14 – 16).

Corey Rosenbloom, CMT

4 Comments

4 Responses to “Triangle Breakout Play in Boeing BA Jan 8”

  1. Uxio Fraga Says:

    Hello!

    I'd like to ask why do you think BA could pullback to the $57/$58 level.
    As I can see, there is support at $59.1or at $56.3, but I can see any reason for the price to stop at $57/$58.

    Are you using some Fibonacci retracements or something like that to discover that virtual support area there?

    Since I've missed the breakout, I'd like to cacth the pullback and I was thinking of trying a first entry at $59.1 and, if failed, a second one at $56.2. Do you think is too long for a pullback?

    Thanks in advance!

  2. mikevadon Says:

    I just came to the realization from watching this Bloomberg video that at the average rate of job growth coming out of previous recessions it would take us 11 years to get back to 2007 levels of employment. In fact, even if we were at 300% above the average, which would represent a very aggressive recovery, then it would take 3-4 years to get back to 2007.

    Link to Bloomberg Video:

    http://bit.ly/5nZ8yB

  3. Awesome Trading Links of the Week | SMB Capital - Day Trading Blog Says:

    […] Triple Breakout for BA. […]

  4. Guest Says:

    I just came to the realization from watching this Bloomberg video that at the average rate of job growth coming out of previous recessions it would take us 11 years to get back to 2007 levels of employment. In fact, even if we were at 300% above the average, which would represent a very aggressive recovery, then it would take 3-4 years to get back to 2007.

    Link to Bloomberg Video:

    http://bit.ly/5nZ8yB