General Electric (GE) Stock Surges 6% in 2020 Amid Boeing 737 MAX EU Return Hopes

General Electric's aerospace segment, responsible for manufacturing engines for the Boeing 737 MAX, experienced a notable stock increase of over 6% on Friday. This surge follows optimistic statements from Patrick Ky, Executive Director of the European Union Aviation Safety Agency (EASA), who indicated that the extensive safety enhancements Boeing implemented could allow the 737 MAX to resume flights across Europe before year-end 2020.

Ky emphasized, "Our evaluations confirm the aircraft's safety, reaching standards sufficient for approval," addressing concerns stemming from the two tragic crashes that grounded the jet since March 2019, which resulted in 346 fatalities. Boeing has since upgraded both software and hardware systems to prevent future incidents.

Highlights

• EASA's positive safety assessment suggests the Boeing 737 MAX may return to European airspace by late 2020.
• GE shares have broken above a nine-month downtrend with increased trading volume, signaling potential for continued gains.
• Boeing stock surpassed a key resistance level in September, turning it into support, indicating bullish momentum.

The anticipated reentry of the 737 MAX is a significant boost for GE’s aerospace business, which suffered a 44% revenue decline in Q2 2020, with analysts projecting a 39% drop for Q3. As of October 19, 2020, GE's market capitalization stands at $63.8 billion, with a modest dividend yield of 0.55%, and the stock is down 34% year-to-date but up 3.55% over the past three months.

Technically, GE's stock broke above a prolonged downtrend line on high volume, suggesting further upward momentum. Investors should consider taking profits near $10.80, where resistance from a key horizontal trendline exists, and employ a stop-loss below the October 15 low at $6.61, adjusting to breakeven if the price surpasses the June high of $8.57.

Investor Insight

A downtrend is characterized by progressively lower highs and lows, indicating declining price momentum over time. Breaking such a trend often signals a potential reversal or new upward movement.

Next, we analyze Boeing's recent financial performance and key chart levels to watch.

The Boeing Company (BA)

Seattle-based Boeing has faced challenges throughout 2020, including delays in returning the 737 MAX to service and a global reduction in air travel due to the COVID-19 pandemic. The company reported a Q2 loss of $2.4 billion ($4.20 per share), with commercial aircraft revenues plunging 65% year-over-year. Wall Street anticipates a Q3 loss of $2.23 per share, with earnings expected on October 28 before market open. Boeing's stock is trading at $167.35 with a market cap of $94.5 billion, down 48% year-to-date and 6.35% over the last three months as of October 19, 2020.

Technically, Boeing shares broke above a long-term resistance line in late September, which now acts as support. Following this, the stock rose nearly 2% after Ky’s positive comments on the 737 MAX. Traders targeting further gains might set profit objectives near the summer high of $234 while managing risk with stop-loss orders below the $155 trendline.

Investor Insight

Upside potential refers to the expected increase in an investment's value, often determined through technical or fundamental analysis to forecast future price movements.

Disclosure: The author held no positions in GE or Boeing at the time of publication.

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