Boeing had an ugly day of trading on Tuesday. Wednesday could either be much better or much worse for the stock once the company reports earnings, according to the options market.
"As you have comments that don't seem to be as positive heading into these earnings, Boeing has started to increase the risk that investors are anticipating around earnings," Stacey Gilbert, market strategist at Susquehanna, told CNBC's "Trading Nation" on Tuesday.
The options market is "expecting potentially a 6 percent move" on that release, said Gilbert. "This is greater than what we've typically seen over the last eight quarters of around 4 percent."
The Chicago-based aerospace and defense company tumbled nearly 3 percent on Tuesday, a sell-off in sympathy with competitor Lockheed Martin. The latter had dropped after failing to raise its cash flow projections for fiscal 2018 alongside other updated guidance.
Tuesday's sell-off comes on the back of a major run-up in the aerospace sector over the past few years.
"This has been a much loved sector. If you look at ITA, that's the iShares Aerospace and Defense ETF, just since 2016 it's had $4 billion in inflows," said Gilbert.
Before Tuesday's decline, the ITA had added nearly 9 percent for the year to date. It increased 34 percent in 2016 and 19 percent in 2017.
That love for the aerospace sector has pushed Boeing to stratospheric heights, according to Matt Maley, equity strategist at Miller Tabak.
"We do have to keep things in perspective," Maley said on "Trading Nation" on Tuesday. "It had this massive, massive rally last year and that took it to an incredibly overbought level."
Boeing shares surged almost 90 percent over 2017, marking it as the best performer in the Dow Jones industrial average. Before Tuesday's slump, it had risen another 15 percent in the year to date.
Its rally put its relative strength index as high as 90.8 in early February, well over the 70 level indicating overbought conditions.
"That's its most overbought ever. I went back into all the way into the mid-1970s and I couldn't find a time where it was anywhere near this overbought," said Maley.
Boeing's RSI has now settled closer to 62, below the 70 level suggesting overbought territory but above the 30 threshold indicating oversold conditions.
"Also look at its premium to its 200-day moving average which was well over 100 percent – again, another extreme," said Maley.
Its decline on Tuesday puts Boeing at its 100-day moving average, though still more than 13 percent above its 200-day. It has not crossed below that support level since September 2016.
Boeing is scheduled to report its first-quarter earnings before the bell Wednesday. It is expected to post a 28 percent rise in profit and 6 percent increase in sales for the quarter. The company has beat earnings expectations in every reporting season since its first quarter of 2016.