During the Lightning Round segment of Mad Money Tuesday one caller asked Jim Cramer about Kratos Defense & Security Solutions Inc. (KTOS) . "I've liked this one for a long time," was Cramer's response.
Let's check out the charts of this defense contractor and security systems integrator for the federal government and for state and local agencies.
In the daily bar chart of KTOS, below, we can see that the shares were quickly crushed in February and March but rebounded into early June. Prices have made a number of upside attempts to break out to a new high but all the rallies failed, including the one this month. KTOS briefly made a new high but then reversed direction. This temporary push up to a new high and then downside reversal might be considered a bull trap. The stock is retesting the 50-day moving average line as well as the rising 200-day moving average line.
The On-Balance-Volume (OBV) line has been in a decline the past 12 months and tells us that aggressive selling has been going on for months. The Moving Average Convergence Divergence (MACD) oscillator is only a fraction above the zero line and thus close to a sell signal.