Bitcoin, Tesla (TSLA), Boeing (BA), and what is RSI?

Podcast Transcript

Hey this is Jeffrey with another edition of Stock Smart, February 22nd 2021 edition. Hope everyone is doing well, market is unwinding a bit, S&P oscillator still unwinding, markets down about 50 basis points right now as we expected and see more to come. Couple things over the weekend happened on Friday. Keith Gill, the Reddit trader who became famous for his positions in GameStop, purchased another 50,000 shares of the stock. GameStop was up 4-5% today. So maybe that’s having an impact, still short 35-40% at this point. That’s a definitive number, the short total when you look at it again. Remember it’s about 2 weeks delayed. So we don’t know how accurate the 40% is that in the readings that weekend on the shorts. But again Keith Gill the Reddit trader who became famous who was just had a house hearings was testifying this week, bought 50,000 more shares of a stock.

[00:00:54]
So Elon Musk over the weekend talking about cryptocurrency. He said that he admitted that the price of Bitcoin and Ethereum seems high which may be hitting the cryptocurrencies today is Bitcoin is trading down and in fact most of the cryptos today are trading down. It’s down about 53,000 right now. According to some analysts they would estimate that Tesla who has Bitcoin on its balance sheet has made about approximately 1 billion from the investment. But again, it’s getting hammered today. This is where you have, it’s not perfectly correlated. I’m going to do a topic on this in the next week or so where I look at the oscillator, which is the overbought and oversold conditions of the market and we’re going to look at that those numbers and see what the correlation is between Bitcoin moving up and down and the market moving up and down.

[00:01:41]
It’s not perfectly correlated. But again what you see today is the market going down you see Bitcoin going down and all the cryptos are falling right along with it. So is it correlated? It may be more correlated than people think it’s definitely not a Haven. It’s definitely not gold. Which on days like today goes up. Especially in times when we continue to hear about inflation every day the creep in the 10-year which continues to go up everyday and those things are definitely going to affect the equity markets.

STOCK WATCH

So a stock we’re going to watch  and we’re going to do this marketing thing we do where we read the description of the company and see if you can guess it. So we are an American multinational corporation that designs manufactures and sells airplanes, rockets, satellites telecommunications equipment and missiles worldwide.

[00:02:29]
Who are we? Ding ding ding! Boeing. Boeing had another bad weekend, one of their aircrafts 777 had a mid-air explosion, pieces all over the neighborhood in Denver sort of looks like one of those movies that one movie with Tom Cruise where the world was going to come to an end where the airplane is all over the neighborhood. It sort of looks like that and if you’ve ever been to Universal Studios, that’s a pretty cool scene. But there’s these big jet parts that are all over the Colorado area and it’s from another Boeing 777 that had problems over the weekend. So this is the same kind of pattern for Boeing. This isn’t going to be a big deal for them. There’s only about 24 of these types of planes, you know in existence right now that are being used.

[00:03:09]
But again Google Boeing, it’s all going to be negative. And that’s the problem with the stock and that’s why it’s trading in the range it’s in, which it trades now in a range of 160 to 230 and it hit that 230 last year around June when people thought it was kind of rebounding, also hit around in December it bounced up to 240. Now, it’s at about 219. It was down in the early market down about two or three percent making a little bit of a run, probably people realizing maybe it was overdone on the news and then it’s only going to impact 24 planes. Because the FAA has demanded emergency inspections of all the Boeings. They’re not being like forced to not fly, but they are saying they want  to inspect them and then it’s only 24 of their 777s.

[00:03:54]
The engine in fact is not made by Boeing. It’s made by Raytheon. So it doesn’t really impact Boeing in a way that you would think it would like the 737 debacle, but it impacts them in terms of its their name again and it is their liability and responsibility because they put them in their planes. Look at the stock overall, it’s neutral in terms of RSI. It’s not over bought or over sold. But again, it continues to struggle with bad news, you know one time this was a company that the stock was near 400 but it’s really struggled over the last couple years and the issue really comes down to with Boeing and it’s at their backlog of jets, you know jets that are ordered.

[00:04:32]
They had to write off about a hundred billion in early January, that’s a hundred billion of jets that are not going to be purchased, because of outright cancellations and those are mostly in the 737s. So again the last time they did this in December they removed 66 orders from its backlog. They still have a backlog of about 3000 Jets they’re going to be making but also they have a 777 which is a, it’s a long-range aircraft so it’s when you fly to Europe. You know, the flight that had the issues that was flying to Hawaii. Airlines don’t want these so they’re finding cancellations in the 777s because they’re making more money and they’re more efficient to fly smaller planes so Boeing’s had a bunch of issues with the 777 again canceling orders.

[00:05:20]
So their problems haven’t disappeared, the stock looks more appealing because it’s in a, you look at it, you say oh, well this company if it can return normal is going to you know, rebound in the stock, can get up to 380-400, that was when Boeing had tons of cash. Now, they don’t have that cash just sitting there in piles and piles, they used it to pay off and get through all these issues. The real issue is we’re not flying as much hours on planes anymore because of Covid for the last year. So the demand for aircraft in the future is not as high as it would have been as well. I don’t like the stock. I’ve been in it. It’s giving me, it’s made me nauseous at times because it seems.

[00:05:58]
it’s always the stock you get in at the wrong time, you get in and you think they’re safe, then bad news happens. I don’t like it here, a long-term investor, you know, if you’re looking 3 to 5 years out, there aren’t a lot of people in this game, you know who can make airplanes. So in terms of Boeing being a great long-term investment but you’re going to have to go and weather more storms, there are more storms coming for Boeing and it may, if you’re looking at it as a 2-3 year investment the price isn’t terrible right now, but I’m not going to be in it and I’m not going to put clients in it right now. I don’t feel like it’s a safe stock and it continues to get bad news.

THE AVERAGE INVESTOR

So a question we got from Roger.

[00:06:30]
Rogers wants to know, and we talk about it a lot on this show, what is the RSI, or the relative strength index. The relative strength index is a momentum indicator. It’s used in technical analysis meaning those who watch in volumes and flows and charts and use words like support and resistance. So RSI is a technical indicator that determines momentum and it measures overbought and oversold conditions and the RSI is displayed in a line graph, so it goes from 0 to 100 and if you use the RSI to interpret you would say values of 70 or above indicate that a security or stock is becoming overbought and then those that are 30 or below are oversold. And so those are good opportunities to potentially get in a position. The way that a pro uses this, is he looks at a position.

[00:07:19]
He looks at over bought or oversold and picks a time to enter the stock, meaning if a stock is overbought generally it’s going to have to unwind because stocks do not go to the moon. So timing, it helps with timing. So when you see that overbought indicator, you need to be watching that to make sure you don’t enter that position at that time because that generally maybe you bought it too late. Maybe it’s something you just saw on the screen you know stocks we’ve talked about on the show, DermTech, DMTK, extremely overbought conditions, stock continues to kind of move up but you know, it’s going to have to unwind when you look at these charts that go parabolic they generally have to unwind at some point, they always do, all stocks unwind, they have to go back and find some support.

[00:08:02]
So, that’s RSI, and that’s how it’s used by a technical trader. Hey, thanks, another great show. If you have questions send them to Jeffrey@JeffreyKamys.com and we’ll see you next time on Stock Smart.