The Boeing Company (NYSE:BA) announced plans to reduce its headcount, following the stock breaking below a key support level. As traders and investors who created the support with their buy orders have either completed their transactions or withdrawn, Boeing's stock is showing signs of further downward pressure.
When a stock trends lower, it indicates there isn't enough demand to absorb all the sell orders. However, once a support level is reached, the dynamic shifts, as increased demand can stabilize the price. In Boeing's case, the break below support suggests sellers may need to push the price lower to attract renewed interest from buyers.
Sometimes, when a stock gets to support it reverses and a rally occurs. Shares of Boeing recently rallied off of the $163 support level.
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This happens when some of the traders and investors who want to buy shares become concerned that other buyers will bid higher prices. They know the sellers will go to whoever will pay the most.
They don't want to miss the trade, so they increase the prices they are willing to pay. Other concerned buyers see this and do the same thing. It results in a bidding war that can force the shares higher.
But sometimes, when shares drop to support, it breaks, and the stock heads lower. This is what has recently happened with Boeing.
If the support breaks it means that the traders and investors who created it with their buy orders have finished or canceled. A large amount of demand has left the market. At this point, there is more supply or shares for sale than demand or shares to buy.
As a result, sellers will need to force the price lower to get the attention of buyers. Unfortunately for shareholders of Boeing, this is what has happened over the past month.
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