The shares of Boeing plunged nearly 4% in pre-market trading today after the company announced that it would be suspending further manufacture of the flawed aircraft. The 737 MAX had been grounded for close to 9 months, and the company was working on a redesign of the software thought to be responsible for 2 high-profile deadly crashes.
The company is being forced to take the decision as regulators decided it would not allow the company to rush the fixes to meet a self-imposed December deadline. It emerged at hearings into the crashes that regulators may have known about the design flaws but still allowed the aircraft to fly until the Ethiopian Airlines crash. Production had continued and the loss stemming from this decision could hit $9bn, according to estimates.
The impact could be felt along the supply chain, and could also hit the company further as aviation companies press for compensation from Boeing over the suspensions. At least three Chinese airlines have demanded compensation for lost revenue.
Read our Best Trading Ideas for 2020.
The pre-market drop created a gap on the daily chart for Boeing stock, but this gap is starting to close as the US markets open for business. The immediate support lies at 318.16, which is the site of previous lows of Feb 5 and May 2, 2018, as well as August 14, 2019. Further down, we have the 310.84 support level which is formed by previous lows of March 26/April 3 2018 as well as previous lows of Nov 26 and Dec 3 2019. These are the possible downside targets if the selloff in Boeing resumes.
To the upside, 346.98 and 366/98 remain the immediate resistance targets. However, these may just serve as rally points on which it may be possible to sell into rallies if the present bearish sentiment on Boeing persists.