Premium Trades 3-6-12

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Coming into Tuesday several Defense stock charts were setting up well. But then the broad market tripped on the curb and took a header. Oddly that shook up the mix in this sector, breaking the correlation. Take a look.

Boeing, $BA

Boeing, $BA, had been leaking a bit and is not a defense pure play but it really took it on the chin Tuesday falling back to previous support at 72.45. The Relative Strength Index (RSI) is near overbought and the price is outside of the Bollinger bands (BB). This would be a logical place for it to stop, at least for a while to climb back within those BB’s. But the Moving Average Convergence Divergence (MACD) indicator is growing more negative and the fall was on strong volume. With all the volume at price history at 71 and the 100 day Simple Moving Average (SMA) at 70.54 a further drop is certainly possible. Keep your eyes open for the possibility of a bullish Kicker, and open at the same place as Tuesday, 73.24 and a move higher. You see that get on board quickly for a move higher. A break of 72.45 signals more downside.

Honeywell, $HON

Honeywell, $HON, had almost as bad a day as Boeing. It fell out of the BB’s as well and is sitting on the 50 day SMA. It has support lower at 56.75 and 55.43 before the previous support area at 54.85. The kicker is a possibility for this name as well and a move under 57.50 signals more downside and a short opportunity.

Lockheed Martin, $LMT

Lockheed Martin, $LMT, fared a bit better, but still printed an inverted hammer on the day on support at 87.65. The RSI is bullish on this name, but falling now and the MACD did turn negative today, both supporting more downside. But this chart is a lot more enticing than $BA. Support lower at 85.25 would be seen by many as a great entry point. If the two bad news names above reverse this is likely to retest 89 as well. but I would not buy it until it clears 89 or if it continues to fall, until it holds support at 85 or the 83. Not enough in it to buy at 88 for a ride to 89.

Northrop Grumman, $NOC

Northrop Grumman, $NOC, on the extreme looks relatively unblemished by the market move lower as it consolidates over the rising 50 day SMA. The RSI is bullish and moving sideways while the MACD is flat. What is most telling is that it had a large volume down day but you cannot tell it was down unless you look closely. They tried to hammer it and it did not move. The set up on this name remains bullish with a break over 61 looking for a move higher to 64. Continue to look for the long set up to trigger. If it gets dragged lower a move under the 50 day SMA at 58.96 s a good short entry with a stop at 59.50.

Raytheon, $RTN

Raytheon, $RTN, had a bad day and confirmed the spinning top reversal from Monday lower, but it did not break the rising trend line support. One of the strong ones. It has a little room lower to that line, where if it holds, is a good entry along at 50.30. Cracking through 50 signals that the sector is taking it hard and look for more downside to 48 and possibly 45.50 below that. No need to play a rebound long tomorrow unless it moves up over 51.75.

So which stock is right? Is Boeing leading the pack lower or is Northrop Grumman showing that Defense is strong? Wednesday could give a clue. And now you have a plan as to which ones to watch for a return to the previous correlation.

If you like what you see above sign up for deeper analysis and trading strategy by using the Get Premium button above. As always you can see details of individual charts and more on my StockTwits page.

The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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