During Wednesday night's "Mad Money," Jim Cramer said he's got a new favorite in the defense contractors group, and it's L3Harris Technologies Inc. (LHX) , the new combination of L3 Communications and Harris Technologies.
He said the merger of equals between these two well-run companies gives investors a lot to love. Combined, the company has a terrific research and development pipeline, it's got an excellent track record of cutting costs and the company is committed to rewarding shareholders with a 10% dividend boost and increased share buyback programs.
Shares of L3Harris are currently trading at 18 times earnings, a slight premium to its peers. But Cramer said this premium is well deserved and he'd buy shares right here ahead of when L3Harris reports earnings. This mission-solutions provider has no equal, Cramer said, and the merger is compelling. Let's check and see if the charts are compelling.
In this daily bar chart of LHX, below, we can see an uptrend from the late December nadir. Prices are above the rising 50-day moving average line, but it was tested in early July and also back in April. The rising 200-day line remains well below the price action.
The On-Balance-Volume (OBV) line shows an uneven rise from early January and a steep decline in late June. Prices just made a new high for the move up but the OBV line has stopped short of its June peak. The Moving Average Convergence Divergence (MACD) oscillator made a bearish cross to the downside in early June and is now just slightly above the zero-line.
In this weekly bar chart of LHX, below, we can see some potential weakness in the indicators. Prices are above the rising 40-week moving average line, but at the widest point in the past three years. The weekly OBV line has weakened the past six weeks and the MACD oscillator has narrowed in recent weeks.
In this Point and Figure chart of LHX, below, we can see a nearby price target of $205.
Bottom line strategy: LHX is still pointed up but the "shake out" in early July leaves me a little nervous. Longs should consider raising sell stops to a close below $185.