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These 5 Defense Contractors Stand Out In Stock Market Correction As Trump Signs Budget

February 12, 2018 | By | Reply More

Defense contractors hanging tough in the stock market correction are your stocks to watch this week. Boeing (BA), Lockheed Martin (LMT), Raytheon (RTN), Northrop Grumman (NOC) and L3 Technologies (LLL) have relative strength lines that are at or near highs. Our spotlight on military contractors comes as President Trump on Friday signed a two-year budget bill that will provide the military an additional $ 165 billion in defense spending.

How To Handle Your Watch List

X It’s important to stress that in the current stock market correction, these are names to watch for future set-ups, not to buy right now. Stocks that hold up well during a downturn may form new bases and be among the first to break out in a new market uptrend.

But if the technicals begin to falter, investors should drop them from their watch lists.

What Is The Relative Strength Line?

The relative strength line is the blue line on the charts below, separate from price action. The RS line shows a stock’s performance vs. the S&P 500 index. Measuring a stock’s relative strength is helpful when separating strong stocks from weak ones. An RS line at an all-time high is especially positive.

Boeing

Boeing is primarily a civilian aircraft maker, but it’s still a major defense contractor as well. Shares have hit some turbulence amid the broad selloff, but the Dow Jones industrial average stalwart is holding somewhat near its recent peak. The RS  line hit a new all-time high on Feb. 7, even though the major indexes reversed to close the session lower.


IBD’S TAKE: With the stock market in a correction, this is not time to start making new buys. But rather than step away completely, it’s more important than ever for investors to stay in step with the market. For our latest market analysis, be sure to read The Big Picture.


Lockheed Martin

Lockheed Martin, the world’s largest defense contractor, was able to find support at the 50-day line early this past week. The RS line is holding at a high, even with shares reversing lower for a second trading session.

Raytheon, Northrop Grumman

Military contractors Raytheon and Northrop Grumman have relative strength lines that are continuing to hit new highs as well, and they too were able to find support at the 50-day line this past week.

L3 Technologies

L3 Technologies is the only defense contractor stock here that is currently testing support at its 50-day line. With the S&P 500 index rebounding from its 200-day line on Friday, leading a broad stock market bounce, L3 closed the week just above its 50-day. The relative strength line is holding at a high.

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