The Aerospace sector is falling out of orbit. (August 23, 2016)
LMT RTN NOC RTN LMT NOC HII
Today I want to look at aerospace and defense, here’s why: This stuff, lets just say it’s reentering the orbit here. This is a sector that we’ve been on for a while. I haven’t covered it in a few weeks on Stock Market Mentor because of the direction that this thing has been going, but I’m making the call now. Lockheed Martin ( NYSE:LMT ), for example, has been moving up really, really nicely for a long time in actually a well defined, what I would call an easy chart. Uptrend, sideways to down move in a volatility squeeze here. So then when the stock starts moving higher you know this has some room, and then we get a sideways consolidation. All this is all rear view mirror stuff. I get that. A move higher, another correction that is at a higher level than this one. Same thing, volatility squeeze, Boom!
That leads us to where we are now. A higher high here, great. The trendline is in tact of these 3 tops right there. We can draw a trendline, though, here, along here a breakout. Kind of got a second channel within the first channel. But this is why I’m on to this: First of all it is a sector specific thing not just a stock specific thing. This is a major high volume reversal right here, that’s a pretty big pullback. It doesn’t really break the trend but if that doesn’t get your attention it’s because you weren’t looking. And then we get a test of the 50-day moving average, but a move back up to the top. “So okay, maybe we’re okay. Maybe this is what Dan calls a shot across the bow, but we’re going to be okay. Maybe, maybe, yes, yes, yes, we’re okay. Oh crap!” So this is the ‘Oh crap’ pattern, this is a higher high but now this is lower low. You can call this a head and shoulder pattern. You can call it whatever you want. Here’s what I call this, I call it distribution. It’s distribution after a really strong move higher. A lot of money just kind of likes technology these days, but just not aerospace.
Look at Raytheon ( NYSE:RTN ). It’s not as obvious as Lockheed Martin ( NYSE:LMT ); the uptrend is still really intact, but this really has kind of a top here of about 144ish, 143, 144.00. On Lockheed Martin ( NYSE:LMT ) I would just be selling that thing. On Raytheon ( NYSE:RTN ), I don’t think it’s a bad call just to be taking profits as well. I wouldn’t be buying this. But if this thing starts falling below the 50-day moving average, which, by the way from a dollar standpoint you can let it fall. In other words, you’re giving up 2 percent. If the stock starts trading down here BELOW the 50-day moving average, then I think you want to sell. If it’s me, I’d sell half now, figure out the rest if the stock does test that moving average. This was a sell yesterday. Today it is a, yes by gosh I’ve got to sell this thing. This is a volatility squeeze coming to the downside. Could it be a fakeout? Could this move higher? Well, only if you believe Raytheon ( NYSE:RTN ) and Lockheed Martin ( NYSE:LMT ) are going to move higher.
But this one ( NYSE:NOC ) is coming out of a squeeze on volume. You don’t want to be there. And then the last one is Huntington Ingalls ( NYSE:HII ). It is still kind of in the trend along the 50-day moving average. But this is another one where you really don’t want to be long. So that’s my call on aerospace and defense. You know what? It’s time to hit the road. It’s time to get out of that sector. You can always get back in, but this stuff is no longer trending higher. It’s either correcting or at least it’s trending sideways for a while. So get out while you can and then put your money to work someplace else.
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