Follow Up – (BA) April 12, 2012

As a potentially profitable opportunity presents itself, John will send you an alert with specific trade information as to what should be bought, when to buy it, and at what price.

Explanation to Previous Trade:

Buy the Boeing (BA) August, 2012 $70 Puts at $3.45 or best

Opening Trade


expiration date: 8-17-2012

Portfolio weighting: 5%

($5,000/100/$3.45) = 14 Contracts

Boeing Aircraft (BA) is one of the great icons of American manufacturing, and also one of the country’s largest exporters. I was given a private, sneak preview of the new Dream-liner at the Everett plant days before the official launch with the public, and I can tell you that this engineering marvel is a quantitative leap forward in technology. No surprise that the company has amassed one of the greatest back order books in history.

I can also tell you that my family has a very long history with Boeing (BA). During WWII, my dad got down on his knees and kissed the runway when the B-17 bomber in which he served as tail gunner (two probable’s) made it back despite the many holes. It was only after the war that he learned that the job had one of the highest fatality rates in the in the services.

Some 40 years later, I got down on my knees and kissed the runway when a tired and rickety Boeing 707 held together with spit and bailing wire, which was first delivered as Dwight Eisenhower’s Air Force One in 1955, flew me and the rest of Reagan’s White House Press Corp to Tokyo in 1983 and made it there in one piece.

I even tried to buy my own personal B-17 bomber in the nineties for a nonprofit air show I was planning, but was outbid by Paul Allen on behalf of his new Everett, Washington aviation museum. Note to self: never try to outbid Paul Allen, a co-founder of Microsoft, on anything.
So it is with the greatest difficulty that I examine this company in the cold hard light of a stock analyst. There is nothing wrong with the company. But its major customers around the world are suffering from some unprecedented stress.

US airlines are getting hammered by the high cost of fuel. Delta even resorted to the unprecedented move of buying its own refinery to assure supplies. Europe, where Boeing competes fiercely against its arch enemy, Airbus, is clearly in recession. Government owned airlines are in ferocious cost cutting mode.

China, another one of Boeing’s largest customers, is also slowing down. As for Japan, the economy there is going from bad to worse. All Nippon Airways was awarded the first Dream-liner for delivery because it is such a large customer. It is just a matter of time before this harsh reality starts to put a dent in the company’s impressive earnings growth.

Take a look at the chart below and you’ll see what I mean. Despite have a tailwind of one of the strongest bull markets in history, (BA) shares have continuously bumped up against an invisible ceiling. Now that we have some general market weakness, I think the stock is ripe for probing some serious downside.

If the sell-off continues for another week or two, we could take a run at the 200 day moving average at $68.75. Break that, and the next support is at $60. Touch $60, and the August, 2012 $70 puts that I picked up yesterday for $3.45 could hit $9. Even half of that move would produce a great trade. But you may have to suffer some turbulence to get there. This is not for the weak of heart.