Stock prices across the aerospace and defense sector have been trading within a period of consolidation since recovering from the March lows. Given the recent uptick in momentum, followers of technical analysis will want to note the recent bullish crossovers between long-term moving averages discussed in this article. This popular long-term buy signal, which seems to be easily found across the aerospace and defense sector, could suggest that the segment is in the early stages of a long-term uptrend.
- Bullish crossovers between the 50-day and 200-day moving average on charts across the aerospace and defense sector suggest that we could be in the early stages of a long-term move higher.
- Active traders will likely use the long-term moving averages as guides for determining the placement of stop-loss orders.
iShares U.S. Aerospace & Defense ETF (ITA)
Traders seeking exposure to niches such as aerospace and defense often turn to exchange-traded products such as the iShares U.S. Aerospace & Defense ETF (ITA). In case you are not familiar, the ITA portfolio comprises 35 holdings that manufacture commercial and military aircrafts and other defense equipment.
Looking at the chart below, you can see that the price has trended sideways for most of the summer. The uptick in momentum over the past several weeks appears to be the push that was needed by the bulls to trigger a bullish crossover between the 50-day and 200-day moving averages. The popular long-term buy signal, shown by the blue circle, is often called a golden cross. Followers of technical analysis use the crossover to mark the early phases of a long-term uptrend. From a risk-management perspective, stop-loss orders will most likely be placed below the combination of support levels near $167.54 to protect against a sudden shift in market sentiment or underlying fundamentals.
Raytheon Technologies Corporation (RTX)
As the top holding of the ITA fund, with a weighting of 18.30%, Raytheon Technologies Corp. (RTX) will likely capture the bulk of traders’ attention over the weeks ahead. Looking at the chart below, you will notice that the move higher over the past several weeks has triggered a bullish crossover between the long-term moving averages.
This current trading setup suggests that the bulls are in control of the momentum and that buy orders will be placed as close to $61.90 as possible. Stop-losses will most likely be placed below the support levels in case of a surprise move lower.
The Boeing Company (BA)
Another top holding of the ITA ETF that will likely gain attention of active traders over the final weeks of 2020 is The Boeing Company (BA). Looking at the chart below, you can see that the stock has recovered nicely from the sharp selloff in March.
Again, with the recent uptick in momentum, the bullish crossover between the long-term moving averages and nearby trendlines could be all that is needed by traders to suggest that we are only in the early stages of a major move higher. To protect against a sudden shift in company fundamentals or market sentiment, traders will most likely place stop-loss orders below one of the support levels, depending on their risk tolerance and investment outlook.
The aerospace sector, one of the largest and most powerful industries in the United States, supplies five markets: military aircraft, missiles, space, commercial airliners, and general aviation. The U.S. aerospace sector is considered the largest in the world and is the main supplier of both military and civil aerospace hardware to the rest of the world. Aviation is one of the fastest-growing industries in the United States, and it has increased yearly at the rate of at least 14%.
The Bottom Line
Bullish momentum in recent weeks has triggered crossovers between major moving averages across the aerospace and defense sector. Based on the charts discussed above, traders will most likely place buy orders as close to current levels as possible and then protect against a shift in fundamentals or market sentiment by placing stop-losses below nearby support.
At the time of writing, Casey Murphy did not own a position in any of the assets mentioned.