Aerospace giant Lockheed Martin Corporation (LMT) rallied to a four-month high on Thursday after President Donald Trump walked away from a Hanoi peace summit with North Korean leader Kim Jong Un. The world's largest defense contractor builds state-of-the-art missile and anti-missile systems as well as fighter jets that could be used to deliver payloads in the event of a military clash with the rogue nation.
The stock fell to a two-year low in December, carving the steepest correction since 2008, even though military experts warned repeatedly that negotiations were likely to fail. The aborted summit is likely to be followed by new provocations that include the resumption of North Korean missile testing. In turn, that could speed plans to deploy Lockheed's anti-missile defense systems in vulnerable Pacific islands and the U.S. west coast.
LMT Long-Term Chart (1995 – 2019)
The stock's current incarnation began with the March 1995 public offering that followed Lockheed Corporation's merger with Martin Marietta Corporation. The IPO opened near $26 and turned higher in a strong uptrend that topped out in the upper $50s in 1998. It sold off to an all-time low at $16.38 in 1999 and bounced strongly, completing a round trip into the prior high in the first quarter of 2002. A breakout into mid-year reversed after adding 12 points, dropping to an 18-month low at $41 in 2003.
It took three years for the subsequent recovery wave to reach the 2002 high, yielding an immediate breakout and uptrend that topped out at $120 just six weeks before the October 2008 market swoon. The stock got cut in half in the next six months, dropping to the lowest low since 2005, ahead of a bounce into the upper $80s. That peak marked resistance for the next three years, finally yielding a breakout to new highs in 2013.
The stock posted impressive gains for five years, hitting an all-time high at $363 in February 2018 and turning sharply lower into July. A strong bounce reversed at a lower high in October, setting the stage for a 110-point slide into year end. The 2019 uptick ended the first trip into the 50-month exponential moving average (EMA) since a 2012 breakout as well as the first decline into the .382 Fibonacci retracement of the nine-year uptrend. It has recouped about 70 points so far this year, remounting the 50-week EMA while signaling a potential bottom.
The monthly stochastics oscillator dropped into the oversold zone and turned higher in July 2018, but the bullish signal failed just three months later. It bounced above the prior low in January 2019 and crossed over once again, carving a secondary buy signal. However, the 2018 whipsaw makes it hard to trust the current upward trajectory, at least until the indicator lifts above the September peak at the 60% level.
LMT Short-Term Chart (2017 – 2019)
Two-sided price action between January and November 2018 carved a broad declining channel pattern that broke to the downside in December. The stock remounted new resistance in January, signaling a bullish failure-of-a-failure while reestablishing channel support now centered below $280. As a result, a pullback into that price zone could mark a low-risk buying opportunity for long-term positions.
The on-balance volume (OBV) accumulation-distribution indicator posted an all-time high in April and turned lower in an orderly distribution phase that reached a 17-month low in December. Buying pressure since that time has been impressive, traversing more than half the distance back to the high, but the red line of lower highs could slow or stall accumulation in the coming weeks. Even so, this former market leader could easily trade at new highs in 2019.
The Bottom Line
Lockheed Martin stock is attracting buying interest after President Trump walked away from the Kim summit without a denuclearization deal.
Disclosure: The author held Lockheed Martin shares in a family account at the time of publication.