Raytheon - Breakout Or Lockdown?

Jan. 20, 2019 5:06 PM ETAJRD, RTX1 Comment
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  • As we continue to ramp up our "Investing in the New Space Race" service on SeekingAlpha, we have a note on Raytheon coming out this week.
  • One of the major defense corporations, Raytheon is a key player in the space sector.
  • Its Space & Airborne Systems Division achieved $6.4bn in revenues and $862m in operating income in 2017.
  • The stock price is nudging the 50-day moving average, a key event over the last 12 months.

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Following our note on AJRD this week (which you can find here) we will shortly turn our attentions to Raytheon.  We will be posting an "Initiating Coverage" note covering company fundamentals, valuation, and a brief technical analysis of the stock.

Ahead of that we thought we would flag a key technical event coming up.

Right now the stock is just below its 50-day moving average which as can be seen in the chart below is a key level over the last 12 months.  The 50 day moving average line has been a line of both support (ie. the price falls until it touches the line but doesn't drop below it) and resistance (ie. the price rises until it hits the line but doesn't climb above it) in the last twelve months.  There have been two periods of support and one of resistance.  In October 2018 the price plunged below the 50-day SMA and has stayed below it.  Upon the market rebound, the price is once again nudging the SMA50 on the way up.

This comes at a key time in the market.  The S&P500 is similarly at or around a resistance/support point (c.2600/2650).  But Q4 earnings season is upon us and with it is likely to come some weak 2019 growth forecasts.  So we have momentum in the market and momentum in RTN going into earnings seasons but general concern about forecasts.

So the stock could break out above the SMA50, or it could encounter resistance again.  One to be watched closely in the coming 2-3 weeks.

For the uninitiated - there is nothing fundamental about the SMA50 touch points ... except that people watch them and take notice of them and trade accordingly ... so a thing that isn't really a real thing ... becomes a real thing.  In other words it's an important psychological factor and therefore a real factor in the stock's performance.

More when we post our Initiating Coverage note.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

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