Boeing stock plunges in premarket after planes crashes in China

• Boeing 787-800 jet crashed in China

• Over 130 passenger were on board

• Chinese airline decided to ground all 737-800 jets starting from Tuesday

• Boeing shares drop over 6% in premarket

Tragic news from China hit the wires this morning when the media reported that a passenger plane of China Eastern Airlines crashed in the southern part of the country. There were over 130 people on board and so far there is no news on survivors. Plane that crashed was a Boeing 737-800 jet and news created big downward pressure on Boeing's shares in premarket.

Boeing 787-800 crashes in China with over 130 passenger onboard

A Boeing 737-800 passenger jet operated by China Eastern Airlines crashed this morning in Guangxi province, in southern China, on flight from Kunming to Guangzhou. So far, there is no information whether any of the 132 people on board survived (123 passengers and 9 crew members). Rescue action is ongoing but it is difficult as the plane crashed in mountains and resulted in significant fires in the area. There are no official reports on the cause of a crash but witnesses questioned by Chinese media said that plane disintegrated mid-air. An investigation was launched into the crash by Chinese aviation authorities.

China Eastern Airlines to halt flights with 737-800 Boeing planes

According to Chinese media, China Eastern Airlines took the decision to ground all of its 787-800 jets, starting from this Tuesday, for inspection over potential technical issues. Airline has 109 of such planes in its fleet and if flaws are found, Boeing may face not only massive reputational damage but also face high financial claims. There is also a risk that Chinese authorities may decide to ground all 787-800 planes in the country as long as the investigation is ongoing. This could lead to grounding of over 750 jets, currently operated by Chinese airlines, and resulting claims could be massive.

A look at the chart

As negative consequences of the crash could be significant for Boeing, it should not come as a surprise that stock is trading lower in today's pre-market. Shares of Boeing (BA.US) are currently indicated to open over 6% lower in the $180-181 area. Taking a look at the chart, we can see that stock has been trading in a downward channel for over a year now. Price bounced off the lower limit of the channel recently and started to recover. Nevertheless, the outlook looks increasingly bearish following today's news from China. Two levels to watch are resistance in the $190.00 area, which the stock tried to breach on Friday, and a support zone in the $172.50 area, marked with recent local low and late-2020 highs. However, a lot will depend on the results of the investigation by Chinese authorities, and maybe Boeing itself.

Source: xStation5