We reviewed the charts and indicators of General Dynamics (GD) back in early March. At the time we said, "From 2014 to into 2016 GD traded back and forth around the $140 level. It would not be a big surprise to see GD double from this large consolidation pattern. A double of $140 would give us $280 as an upside target. I would risk below $180 for new longs."
Eight months later and prices reached $215 but shy of our $280 price target. Prices turned from up to sideways in June and GD has been testing the rising 200-day line in recent weeks. A close below the 200-day line may not precipitate a decline but a close below $193.55 will put many longs "under water" and then selling is likely to increase. Now that I have your attention, let's review our charts and indicators.
In this daily bar chart of GD, above, we can see that prices are between the declining 50-day moving average line and the cresting 200-day line. The On-Balance-Volume (OBV) line made a very slight new high in October when prices made new highs but it has since been neutral. The trend-following Moving Average Convergence Divergence (MACD) oscillator is below the zero line and crossing towards a fresh outright sell signal.
In this weekly bar chart of GD, above, we can see that we have been testing the still rising 40-week moving average line the past month. A weekly close below the 40-week average will weaken the chart picture. The weekly OBV line has stalled but it has not yet turned decisively lower. The MACD oscillator crossed to the downside in March and it has continued lower.
In this Point and Figure chart of GD, above, we can see the uptrend but also that a break of $193.55 will have bearish implications. If price do not retreat a $218 price target is projected.
Bottom line - longs should consider raising their stop protection to a close below $193 as a break of this level is likely to produce further weakness.