With both Raytheon Co (NYSE: RTN) and Lockheed Martin (NYSE: LMT) both recently at significant long-term highs (new, 52-week highs for LMT and new, 6-month highs for RTN), it is no surprise that both stocks have been experiencing profit-taking over the past few days.
Shares of both RTN and LMT have been pulling back over the past four days, with Lockheed Martin finishing just outside of technically oversold territory and Raytheon closing near breakeven levels on Wednesday. And with Raytheon and Lockheed Martin both scheduled to report quarterly earnings on Thursday, the question for traders and active investors alike is whether or not these stocks have further to fall.
If recent price action in Boeing (NYSE: BA) is any indication, then buyers may be more soon to arrive in this market than traders may think. Boeing reported quarterly earnings on Wednesday that bested analyst expectations and the stock, after trading lower early in the day, rallied toward short-term highs to end the session in positive territory.
Boeing had traded lower for three days in a row before Wednesday’s modest bounce. And like RTN and LMT, Boeing never traded in technically oversold territory and did not make a significant new low before reversing modestly higher. As with Raytheon, Boeing’s pullback came in the context of a rally to new, six-month highs a week ago, and the stock only has been trading in bull market territory since early December.
Real weakness in the sector is more likely to be found in defense stocks like Northrop Grumman Corp (NYSE:NOC). Shares of NOC have dropped for three days in a row and are trading just outside of oversold territory above the 200-day moving average. In fact, NOC only has been trading in bull market territory for the past two weeks. The stock has a short-term edge of just under half a percent and a neutral rating of 6 out of 10.
Traders and active investors looking to avoid single-stock risk may want to consider some of the exchange-traded funds that include these aerospace/defense stocks among their holdings. Among the more widely-traded are the PowerShares Aerospace & Defense Portfolio ETF (NYSE: PPA) and the iShares Dow Jones U.S. Aerospace & Defense Index Fund ETF (NYSE: ITA).
Be sure to read our latest column from 7 Stocks You Need to Know: Marvell Makes Good: Nearly 9% in Less Than a Week.
David Penn is Editor in Chief of TradingMarkets.com.