Part 3

Boeing Co. (BA)

Company Background

Boeing is the biggest company within the XLI with its 7.87% weight. That being said, Boeing plays an important role for the overall performance of the leading ETF. The Boeing Company (BA) is a leader in the production of jet aircrafts, along with varied defense products, making it one of the largest defense contractors in the United States. The company’s customers include domestic and foreign airlines, the Department of Homeland Security, the US Department of Defense, and the National Aeronautics and Space Administration (NASA).

Boeing has suffered quite a lot already during the coronavirus pandemic due to the lack of demand among its airline customers. The pandemic has led to a closure of the airports and cancellation of flights, which has led to a huge decrease in the production of airplanes. Therefore, Boeing has decided to cut 10% of its staff due to the current financial situation it is going through. The company’s share price fell drastically from $350 in mid-February to only $90 a month later. In other words, the stock lost 74% of its value because of the coronavirus pandemic and the sell-off it caused. Yet, Boeing has been in business for more than 100 years and has become a global player in the sector it operates.

In other words, even though the company has suffered a lot due to the coronavirus pandemic, we believe it would still do well in the longer run based on its leading presence in the market it operates.

Based on that the company failed to meet analysts’ expectations for the 2nd quarter of this year. Yet, it managed to do quite well in the 3rd quarter and even though it still delivered a loss for the quarter, it was a lot better than the analysts had expected (-$1.39 vs. -$2.33 expected or 40% better). In other words, we have seen a sign for a recovery in the company’s business and we believe it will do well over time.

Technical Analysis

Boeing stock (BA) has been in a massive uptrend since the end of October. As we mentioned earlier, the company showed an improvement in its financial statements and that has been a main reason for the bullish rally. Moreover, the vaccine news that came out recently has also been among the main reasons for the strong bullish trend on the market and Boeing has greatly benefited from that as well.

In fact, the stock bounced from the support at $142 on the 30th of October to reach the $243 highs on the 7th of December. (71% rise). Then we have seen a classic double top at that point that led to a short-term profit-taking correction that has sent the price to the current levels at $230. Yet, we remain bullish on the stock for the next few weeks overall and believe the recent correction would soon be giving us a great chance to start buying at a decent discount and make high profits to the upside, following the overall bullish trend on the stock. The daily chart clearly shows the strong support at $220, which matches with the 23.6% Fibonacci retracement level, giving further bullish indications. The RSI & Stochastics are also heading down from the overbought towards the oversold level and would soon be giving buying indications as well. Overall, we believe traders and investors would take advantage of that correction in order to follow the overall uptrend on the stock and that would give us a chance to maximize our profitability to the upside.

Chart: Boeing Company (BA)

We will be waiting for a further pullback on the stock from the current $230 to around the support at $220-$222 where quite a lot of buying pressure is expected and start opening our buy positions at that point. Should the price drop further we would be interested in adding more to our buy positions at the next key support at $210 that would give us a chance to get a better average price and further maximize our profits to the upside. Our first take profit target is set at $235-$240, followed by the next target at $250-$255 where we would be fully cashing in our profits and waiting for another correction on the chart so we could buy again at a strong support mark.

Citigroup Co. (CITI)

Company Background

As our first stock pick from the XLF we have decided to analyze the performance of Citigroup, which currently accounts for 5% of the XLF’s portfolio.

Citigroup is the 3rd largest bank in the US and it is part of the Big Four banks together with JP Morgan Chase, Wells Fargo and Bank of America.

The Bank provides its customers with diversified financial services including consumer banking and credit, corporate and investment banking, securities and wealth management. Being a global leader in the sector it operates, Citigroup has got around 200 million customers in 160 countries around the world.

Financial performance & Technical overview

The company has kept on delivering great financial results over the past few years. The revenues and profits of the company have been rising steadily following the economic growth in the US and globally.

Furthermore, due to the strong financial performance of the company, CITI has managed to report better than expected financial results in all 3 reported quarters so far this year. In other words, the company managed to perform well even during the tough times in the economy caused by the COVID-19 pandemic.

Citigroup’s Q3 performance was outstanding. It delivered almost 40% better earnings per share than what analysts had expected and that has been extremely bullish for its recent share price performance. Actually, the stock started rising quickly on the 30th of October when it was trading at the $40 lows to reach the $60.50 highs on the 10th of December (50% rise in 5 weeks). The financial sector’s performance as a whole has been very outstanding in the past few years and the largest financial institutions in the US have kept on performing great even during the zero-interest rates environment that is definitely not good for their business in general. Anyway, they are among the biggest winners at the moment and based on all above-stated facts, we would be looking to add Citigroup to our portfolio.

From a technical standpoint, the price struggled to break the $60 mark for a few days and is now correcting some of its gains, dropping to the current $59. Yet, the daily chart clearly shows the strong support (broken resistance) at $57-$57.15 where lots of buying pressure is expected. Even if the price breaks the first key support at that point it would be testing the next support level at $55 where traders and investors are expecting to buy even more aggressively. So, we remain bullish on the stock and will take advantage of adding it to our portfolio.

Chart: Citigroup, Inc.

We will start buying CITI stock aggressively at the first key support at $57-$57.15. Should the price drop further and break the support, we would be adding more to our long positions at the next key support at $55. Our first profit-taking target would be at $59-$60, followed by the next target at $63-$65 where we would be fully cashing in our profits and waiting for another good opportunity to own that great stock in the future.


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