Leaks in Defense Stocks Ahead of Earnings
- Posted by Greg Harmon
- on October 25th, 2011
Several Defense Stocks will give some insight into their companies and their thoughts about the future of the Defense budget when they report earnings tomorrow. But their price action is a potential leak of what is to come. What do their stock prices tell us the night before? Lets look at three, Boeing, $BA, Northrop Grumman, $NOC and Lockheed Martin, $LMT, to see if they offer any insights.
Boeing, $BA, fell out of a rising channel in early August, retested that channel at the end of the month. It then settled into a broad range lower capped at 65.35 where it has been since. Going into earnings in the morning it rejected at resistance again with a large bearish engulfing candle. A move below 63.50 tomorrow will confirm more downside. The Relative Strength Index (RSI) is hovering around the mid line and the Moving Average Convergence Divergence (MACD) is positive but going back and forth in its ability to predict. There is no edge here. If it moves over 65.35 has room higher to 67 and 69 but a move under 62 has support lower at 60 and then 57.50.
Northrop Grumman, $NOC
Northrop Grumman, $NOC, moved higher through resistance at 55.40 last week and continued higher this week. That breakout level will now become support. The RSI is rising and the MACD is increasing, both supporting more upside. This stock is suggesting a move higher after earnings are reported.
Lockheed Martin, $LMT
Lockheed Martin, $LMT, has been moving higher in a series of higher highs and higher lows since early August. The RSI has been bullish since then as well and the MACD is currently increasing supporting further upside. The last three days have taken it up to a touch of resistance at 80, printing a long legged doji Tuesday before earnings in the morning. The doji is a potential reversal, but needs to be confirmed and until then it is in an uptrend. This stock also is set up to move higher.
So of the three two are set up to move higher and one is neutral. Perhaps these stocks have already priced in big defense budget cuts? Wednesday morning will tell.
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Gregory W. Harmon CMT, CFA, has traded in the Securities markets since 1986. He has held senior positions including Head of Global Trading, Head of Product Development, Head of Strategy and Director of Equity. (More)
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