Stock Of The Day: Is Boeing Cruising Lower As Strike Looms?

Boeing Co BA shares may be heading lower. Support has converted into resistance and sometimes this price action occurs just before a downtrend forms.

This is why it is our Stock of the Day.

Another factor to remember is the vote today (Thursday) by members of the International Association of Machinists and Aerospace Workers on a contract proposal that includes a 25% pay increase over four years. If rejected and two-thirds vote to strike, the work stoppage will commence on Friday at 12:01 a.m. PDT.

The $163 level was support in April and August. As you can see on the chart, it has now converted into a resistance level.

Support levels can stay intact for an extended time period due to regretful sellers. Some traders and investors sold while Boeing was at support in April and came to think they made a mistake when the stock rallied soon after.

Some decided to buy their shares back if they could get them at the same price they were sold. As a result, when the stock dropped back to $163 in August, these remorseful sellers placed buy orders.

There were so many of these buy orders that it created support at the same price that had been support before. Now this support has been broken and $163 has become a resistance level.

Levels that were support can turn into resistance due to regretful buyers. Some traders and investors purchased their shares while Boeing was at support and regretted doing so after the support broke when the price moved lower.

Read Also: Boeing Aircraft Production Faces Potential Disruption As 33K Workers Vote On Strike

Some of these remorseful buyers decide to sell their shares. But they don't want to lose money.

As a result, now that the stock has rallied back to levels around $163, they are placing sell orders. There are so many of these sell orders being placed at the level that was support it has turned it into a resistance level.

This could set the stage for a move lower.

Some people who created the resistance with their sell orders may get nervous. They may worry that others who want to sell will undercut them.

They know that anyone looking to buy will go to whoever is willing to sell them shares at the lowest price. So, they decide to reduce the prices they are willing to sell.

Other nervous sellers may see this and reduce the prices they are willing to sell, as well. It could result in a snowball effect that forces Boeing into a downtrend.

In the financial markets, trader psychology makes some price levels more important than others. Seller's remorse can keep support levels intact; buyer's remorse can convert support into resistance.

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