Chart of the Week: Northrop Grumman
It’s time for our chart of the week, and this week we’re gonna be focused in on big defense name Northrop Grumman. NOC is the symbol on this one. So let’s take a look at this chart. It’s been very strong for the past 6 1/2 weeks – and see if we got some more upside to go.
As you can see post-earnings, the stock really made a nice run up and gapped higher back in July from about $440 all the way up to about $470. And it hasn’t stopped, blasting all through $500, and peaking last week at about $524 – $526. And it came down late last week, and it made a nice move up on Monday, September 9, on better volume over here. We can see that.
The stock is overbought – not a bad thing!
Notice that the relative strength is overbought. But it’s been overbought for six weeks, right? So all of those expert technicians who would tell you, “Don’t buy a stock when it’s overbought on relative strength,” that’s a bunch of malarkey. That’s complete nonsense.
Because clearly this is a stock that, once it gets overbought stays there, relative-strength wise, is a great spot to buy on the dips. And you can see this one dip happened right over here, came up over here, and we just recently had another dip. So I think that this more recent dip from a couple of days ago is a great opportunity to jump on board.
What the other indicators are saying
Now let’s take a look at some of these other indicators here.
You can see the MACD is still in overbought territory here. It’s pulled back a little bit only because the trajectory of the moving averages has started to flatten out a little bit. And all this MACD does is tell you about these moving averages and the trajectory of them.
And we can see that the 20-day moving average, which was really moving up at a very steep angle, has started to flatten out a little bit. The 10-day as well, too. The 50, 100, and 200 day moving average continually moving up here.
We see good strength in money flow as well – look at that strength in the money flow.
A couple of indicators we don’t normally look at here.
On balance volume is really rocketed higher too, which means that big institutions are coming in and adding the stock.
And finally we’ll look at the bottom over here, which is the average directional movement – ADX – it’s a directional call. What direction is the stock moving in. When the black line (or the thick line) is on top of the red line (or the thin line), that means the average directional movement is up. And we want to see the ADX at a plus 25 or better. It’s currently at 28. It’s been that high since the middle of July. In fact, we got that crossover here back in late July just before the earnings came out. And that was a buy signal. And it’s been on a buy signal ever since.
Now clearly the momentum was going to stall out. It wasn’t going to keep going at this pace forever. It was going to flatten out at some point. But I think this stock has got some more legs here, maybe up to $550 to $570 before it stalls out again.
NOC is one of the strongest names out there
Make no mistake – Northrop Grumman is one of the strongest names in the markets right now. We haven’t had a whole lot of names, outside of banks or housing, that are making new highs. But certainly some names in the defense area, like Lockheed Martin and General Dynamics, are up there right near new all time highs, much like Northrop Grumman.
Take a look at NOC for a play in the next two, three months.
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