Lockheed Martin: An Updated Strategy for These Volatile Times

 | Aug 09, 2017 | 8:38 AM EDT
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Lockheed Martin Corp. (LMT) is in the news this morning with all the growing international tensions. We have not discussed LMT in Kamich's Korner this year but in early December we had a longer-term positive outlook. Prices did in fact stall in December and January and the uptrend resumed in early February.

Now that prices are $50 higher than December with a "3" handle we need to see where we are both in the short-run and the longer-term picture. Let's take a look at the chart "pictures" and the indicators to see if we can gain any fresh clues.

In this daily bar chart of LMT, above, we can see that prices are above the rising 50-day moving average line and the positively sloped 200-day moving average line. While the volume pattern is flat or neutral, the daily On-Balance-Volume (OBV) line has been rising since early February. A rising OBV line only happens when the volume of shares traded each day is heavier on the up-days than the down-days. Simple math -- add bigger numbers and subtract smaller numbers. When volume starts to expand on down-days the sellers have become more aggressive.

In the lower panel of this first chart is the 12-day price momentum study. As prices have gone higher and higher the pace of the rise has been the same (from June to July) or even slowed from July to August. Momentum will tend to peak before prices peak. This small bearish divergence is not a reason to sell.

In this weekly bar chart of LMT, above, we can see a stock that has done extremely well. The 40-week moving average line has a smooth and steady uptrend and prices have tested the line successfully a number of times. The more times a moving average line or a trend line is tested the more significant it becomes and the more we should pay attention if and when it breaks. The weekly OBV line shows a slow but steady rise the past three years but it has yet to surpass its August 2016 peak.

The trend-following Moving Average Convergence Divergence (MACD) oscillator in the lower panel is well above the zero line in a bullish configuration.

In this Point and Figure chart of LMT, above, we can see a durable uptrend with a number of consolidations along the way higher. The number "8" is the latest entry on the chart and the first input for the month of August. Prices have achieved their target but are still pointed up. Prices could continue higher but a period of sideways price action or consolidation would be welcomed. It will take a decline back down to $291.05 to make a down column of "O's" and a decline to $274.19 to break the low of the latest up-column.

Bottom line: The trend is certainly up but that does not mean we ignore risk. Traders who are long should consider raising sell-stop protection to a close below $285 and investors to a close below $275. Having a game plan to lock in gains helps me sleep at night.

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