Today’s article will be the final in the “New high” series. As a reminder, when it comes a stock hitting a 52-week high, I prefer to look for ones hitting a “NEW” high. To me, this would be a stock that hasn’t hit a new 52-week high in quite some time. In addition, and more importantly, I want the stock to have broken through a key area of resistance. This way I know that it wasn’t just any move higher, it was a key breakout. A stock that fits that description would be that of Lockheed Martin Corporation.
Lockheed Martin Corporation is a global security company engaged in research, design, development, manufacture, integration, and sustainment of advanced technology systems and products. It also provides a range of management, engineering, technical, scientific, logistic, and information services. It serves both domestic and international customers with products and services that have defense, civil, and commercial applications, with its principal customers being agencies of the United States Government. It operates in four business segments: Aeronautics, Electronic Systems, Information Systems & Global Services, and Space Systems.
To review Lockheed Martin’s stock, please take a look at the 1-year chart of LMT (Lockheed Martin Corporation) below with my added notations:
LMT had been trading mostly sideways from February until July, while running into resistance at $82 (red). After a strong sell-off in July and August, the stock has worked its way back up to that $82 level. The $82 resistance meets my definition of a clear resistance level that would signify an important 52-week high breakout if LMT could manage to break above it. The stock creating the up trending support (blue) line seems to imply an impending breakout. IF that were to happen, the stock would probably be heading higher, most likely on a new uptrend.
The Tale of the Tape: LMT has formed a key resistance level at $82, which would be a 52-week high breakout if LMT could break above it. A long trade could be entered if LMT breaks above $82, with a stop set below that level. A small “starter” position could also be entered AT the $80 level (teal), which could then be added to if the stock breaks out to the new high.
Before making any trading decision, decide which side of the trade you believe gives you the highest probability of success. Do you prefer the short side of the market, long side, or do you want to be in the market at all? If you haven’t thought about it, review the overall indices themselves. For example, take a look at the S&P 500. Is it trending higher or lower? Has it recently broken through a key resistance or support level? Making these decisions ahead of time will help you decide which side of the trade you believe gives you the best opportunities.
No matter what your strategy or when you decide to enter, always remember to use protective stops and you’ll be around for the next trade. Capital preservation is always key!
Christian Tharp, CMT