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Trading Lockheed Martin as Shares Hit New Highs on Earnings

Lockheed Martin continues its bullish ways, hitting new highs after the better-than-expected earnings.

Lockheed Martin  (LMT) - Get Lockheed Martin Corporation Report was rising Tuesday, hitting new all-time highs after better-than-expected fourth-quarter earnings.

However, the rally was perhaps more meek than investors would have expected. Shares gained about 0.7%, lagging the S&P 500’s 1% gain, despite beating top- and bottom-line estimates.

Earnings of $5.29 a share beat analysts’ expectations by 25 cents, while revenue of $15.88 billion grew 10.2% year over year and topped estimates by $600 million. The stock wavered a bit over the past few sessions, but nowhere near as much as most stocks. In fact, several defense stocks - like Northrop Grumman  (NOC) - Get Northrop Grumman Corporation Report or United Technologies  (UTX) - Get n.a. Report - hover near their highs too.

Lockheed Martin remains in a very strong uptrend and continues to power higher. Until that changes, there’s little reason to bet against the name. Let’s look at the chart to see when that may happen.

Trading Lockheed Martin Stock

Daily chart of Lockheed Martin stock. 

Daily chart of Lockheed Martin stock. 

Shares of Lockheed Martin gapped higher to start off the year and haven’t looked back since. The stock has ridden a strong uptrend (purple line) higher, all while sporting an overbought condition according to the relative strength index (blue circle).

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Here’s the thing about the relative strength index, or RSI: It’s only useful when used in conjunction with other metrics or measures. For instance, if Lockheed Martin stock was to post a gap-up followed by a big reversal lower, or break below trend, then an elevated RSI reading would help confirm that shares likely may head lower in the short term.

However, a stock can command an overbought or oversold condition for much longer than expected. That’s evident by this chart alone, as LMT stock has had an elevated RSI virtually all month. But if the trend is intact, traders need to respect the price action. 

For Lockheed Martin, the first sign that turbulence may be on the way will come on a close below uptrend support. That will immediately put the 20-day moving average on watch, and potentially the $420 level. Above these marks and it’s hard to be bearish.

However, a move below the above marks could send shares down to the gap-up level near $400 and/or the 50-day moving average, whichever comes first.

On the upside, see if LMT stock can clear $440 and get to $450.

Here’s the bottom line: Above uptrend support and the stock remains very bullish. Above the 20-day moving average is still bullish, but a move below could cause Lockheed Martin to lose some altitude.