Defense Stocks are Buzzing the Tower

• Posted by Greg Harmon
• on January 3rd, 2012

Defense stocks attempted to break out of patterns to start the year but were sent back to base. Was this a failed breakout or are they coming back and buzzing the tower? Let’s take a look.

Boeing, $BA

Boeing, $BA, broke out of a bull flag higher only to fall back and close near the low of the day. In doing so it printed a Solid Black Candle showing bearish intraday activity despite finishing higher. There are positive signs for a continued move higher. Volume was higher on the break out, the Bollinger bands are expanding to accommodate more upside, the Simple Moving Averages (SMA) are sloping higher, and the Relative Strength Index (RSI) remains bullish. But the Moving Average Convergence Divergence (MACD) indicator is diverging lower and about to cross negative. This is not a signal to sell or short but gives pause to start a position or add. Not clear if it is returning to base or circling. Wait for the breakout to be confirmed higher Wednesday before entering long or adding.

Lockheed Martin, $LMT

Lockheed Martin, $LMT, also broke the bull flag higher but printed a Solid Black Shooting Star for the day. The Volume, Bollinger Bands, SMA’s and RSI are supportive of a move higher here as well. Additionally the MACD is supportive. this looks to be buzzing the tower. Confirmation higher should start this on a mission to 85.

Northrop Grumman, $NOC

Northrop Grumman, $NOC, broke both a bull flag and a double top only print that same Solid Black Candle finishing on the low of the day. Less positive reinforcement in this name and the SMA’s are mainly flat despite the bullish RSI and expanding Bollinger bands. This looks the most likely of the 3 to just return to the base, but could still confirm the break out higher.

Watch these tomorrow and be ready for action. Also here is some information on the reciprocal candle, Hollow Red Candle, from a post in November 2010.

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