BA - Long

2 Okt

Mean Reversion Trade - Ticker: BA (Long)

Setup:
Mean Reversion Trade (Long)

Key Criteria:
1. Price has tested a prior breakout/breakdown level, 15+ day pivot in price, or monthly/weekly Fair Value Gap (FVG).
2. Market Cap is above $10 billion.
3. Price swept highs, closed lower, with a gap between the open and the previous candle close.

Specifics for BA:
* Market Cap: $95 Billion
* Relative Volume: 1.21
* Technical Levels: $150.00
* Technical Setup: Mean reversion trade based on weekly fair value gap fill, increased relative volume, price closing above VWAP.

Trade Details for BA:
* Position: Long
* Entry Price: $154.50
* Stop Loss: $149.50 (below daily pivot)
* Risk per share: $5.00
* Risk: 1% of account equity
* Order Type: Buy Stop Order

Targets:
1. Target 1: $160 (1.2R) — Based on daily range.
2. Target 2: $167 (2.50R) — Based on weekly pivot level.
3. Additional Target: $173 (3.84R) — The full gap fill level.

Exit Techniques:
1. Scale out 33% at Target 1.
2. Scale out another 33% at Target 2.
3. Exit the remaining 34% based on a "Reason2Sell" approach:
* Price Reversal Patterns: Double tops, head and shoulders, falling wedges.
* Overbought Conditions: RSI exceeding 70.
* Negative Divergence: Price makes a new high, but technical indicators don’t confirm.
* Support Level Breakdown: Price breaking below significant support levels.
* Increased Volatility: Sudden surge in volatility or trading volume indicating selling pressure.
* Volume Nodes: Observe price action around liquidity points.

Reasoning:
The technical signal is clear: the price has tested a key weekly/monthly level and shown strong buying throughout the day, closing above both the VWAP and the prior day’s low. This signals a potential reversal and gives strength to the mean reversion trade idea.

1. Stock Sale Impact:
Boeing recently announced a $10 billion stock sale, but the actual sale won’t occur for at least a month. This means there’s a clear trading window of about 20 days where the stock isn’t immediately impacted by dilution concerns, giving us time to capitalize on this technical setup.

2. Earnings Timing:
Boeing's earnings are scheduled for October 23rd, which leaves exactly 15 trading days before the report. The strategy is to exit before earnings to avoid excess volatility, and this window aligns with the mean reversion trade thesis.

3. ATR and Tradeable Range:
With an ATR of $5.00 over the last 15 bars, the stock has a well-defined trading range that supports targeting the $160 and $167 levels. The ATR gives a reliable measure of daily movement, allowing for precise entry and exit planning within this mean reversion setup.

4. Defense Sector Strength:
Boeing (BA) is a key player in the defense sector, and with Lockheed Martin (LMT) and Northrop Grumman (NOC) holding strong while Boeing has slid, it’s worth noting the possibility that geopolitical tensions (e.g., the Israeli-Iran conflict) could boost BA’s involvement and add fundamental strength to the trade. The stock has been underperforming its peers, and this divergence signals a potential for a dead cat bounce or reversal.

5. Options Flow Conviction:
Recent options flow data from October 1st shows significant interest in out-of-the-money call options at strike prices of $170 and $175, with expirations from November 2024 to January 2025. The fact that these contracts are trading at premiums of 98%-100% suggests that large players in the market are positioning for a bullish move in Boeing. This aligns with the technical setup and signals institutional conviction behind a potential bottom being formed.

Stop Loss Strategy:
* Adjust the stop loss after Target 1 is hit, scaling out shares accordingly.

Additional Notes:
* Set automatic scaling for profit-taking as targets are reached. Manage your risk if the full position remains after targets are hit.
* Feel free to ask for any clarification or additional support.