New Downtrend For Boeing? - Boeing (NYSE:BA)

The Boeing Company BA is trending lower Thursday. This comes after the company reported its earnings Tuesday. At first, investors liked what they heard and the stock rallied. But it quickly reversed and is now much lower.

There is a good chance this downtrend continues. This is why Boeing is our Stock of the Day.

Many technical analysts look for patterns on charts without understanding the price action that makes these patterns form. Because of this, they have a difficult time predicting the future direction of the market.

A classic ‘bearish engulfing pattern' appeared on Boeing's chart Tuesday. This indicates that the bears have taken over from the bulls and pushed the price lower. It could be the beginning of a new downtrend.

On Tuesday morning, it appeared that the stock would continue its recent uptrend. The opening price was higher than Monday's closing price. It looked as though the bulls were still in charge.

But by the close on Tuesday, the tide turned. The bears overpowered the bulls and pushed the price lower. The stock traded through Monday's opening and closing prices. This is important because there tends to be support at prices that were recent open and close levels.

It shows that the bears are extremely aggressive and motivated.

The trading range on Tuesday engulfed the trading range on Monday. This is why it is called a bearish engulfing pattern.

Sometimes, a leadership change in the market takes place over an extended time period. This can appear as a rounded top or bottom pattern. Sometimes, the leadership can change after a stock hits resistance or support. This could look like a double or triple top or bottom pattern.

If understood and applied correctly, technical analysis is the study of supply and demand in a market. When the leadership is changing, the price action can appear on a chart as a reversal pattern. See below.