The charts and indicators of General Dynamics Corp. (GD) were inspected at the end of January and I wrote, "After trading sideways around $200 since June, GD broke out on the upside. Prices could continue to trade higher but a period of sideways consolidation would be preferred before heading towards our next price target of $298/$300."
GD has been contained in a choppy sideways pattern the past two months. Let's see if this will change.
In this daily bar chart of GD, below, we can see that prices probed the upside earlier this month and are now below the rising 50-day moving average line. The pace of trading or volume has declined the past two months which is not unusual in trading range situations.
The ability of short-term traders to make money in a sideways market is less than in a trending market. A narrower high/low range results in money going elsewhere in search of profitable opportunities.
The daily On-Balance-Volume (OBV) line has crept slightly higher the past two months suggesting that buyers of GD have been more aggressive. These newer longs could be disappointed and turn sellers if prices do not break out on the upside soon.
In the lower panel is the 12-day momentum study which shows lower highs from January to February to March. Price momentum has weakened while prices have been trading sideways which is variation of a bearish momentum set-up.
In this weekly bar chart of GD, below, going back three years, we can see that prices have been in a strong upside move above the rising 40-week moving average line. The line was tested a number of times since November and each test has been a buying opportunity.
Hindsight is great.
The weekly OBV line has been stalled for a few months but it has not turned lower. The weekly Moving Average Convergence Divergence (MACD) oscillator is crossing to the downside now for a take profits sell signal.
In this Point and Figure chart, below, we have an interesting situation. Prices are showing a little distribution with some rally failures but we also have a $298 price target being projected.
Bottom line: GD is showing some near-term price weakness so this could spillover to a retest of the $210 area in the weeks ahead. As long as the 200-day moving average is not broken with volume increasing on the decline, I think the overall chart pattern is still longer-term bullish.
