When to Buy Industrial Stocks: Boeing, Caterpillar and GE

NEW YORK (TheStreet) -- On Monday, we saw a better-than-expected February reading for industrial production. So now how do we invest today?

I've crunched the numbers for nine key companies in the aerospace, industrial production and multi-sector conglomerate sectors following Monday's report. Production rose 0.6%, stronger than the 0.2% expected by Wall Street economists. The Federal Reserve shows production up 2.8% year-over-year with capacity utilization at 78.8%, which is 1.3% below the 1972 to 2013 average.

What's interesting to note is that the aerospace names that provide products and services to the U.S. military have been the best performers year-to-date, while the industrial and conglomerate names face the drag from weakened demand from emerging markets.

Here are the profiles based upon how we crunch the numbers. This should help you decide when to invest. Take a look at my chart on the next page for more quant analysis on these stocks.

Boeing (BA) ($125.42, down 8.1% YTD): The aerospace giant and Dow component set an all-time intraday high at $144.57 on Jan. 22, then traded as low as $118.77 on Feb. 5. Boeing is trading between its 200-day simple moving average at $120.22 and its 50-day SMA at $131.48, with the 21-day SMA at $127.60. The weekly chart is negative, with its five-week modified moving average at $128.31, and the pattern looks like a parabolic bubble that has popped. Quarterly and semiannual value levels are $120.52 and $117.06, with a semiannual pivot at $123.73 and monthly risky level at $144.42.

Caterpillar (CAT) ($95.67, up 5.4% YTD): The manufacturer of construction and mining equipment and Dow component set a 52-week intraday high at $98.24 on Feb. 24, and began the week between its 50-day SMA at $93.73 and its 21-day SMA at $96.66. The weekly chart is positive but overbought, with its five-week MMA at $94.77 and the 200-week SMA at $89.84. This chart shows a longer-term double-top at $116.55 in May 2011 and $116.95 in Feb. 2012, with a low in-between at $67.54 when the stock came close to its 200-week SMA. Monthly and quarterly value levels are $94.28 and $87.52, with an annual pivot at $95.79 and annual and semiannual risky levels at $97.90 and $118.44.

Deere (DE) ($87.49, down 4.2% YTD): The producer of agricultural equipment traded as low at $83.42 on Feb. 5, then rebounded to $89.67 on March 11 and is currently above its 50-day, 21-day and 200-day SMAs at $87.19, $86.48 and $84.87. The weekly chart is positive, with the five-week MMA at $87.06 and the 200-week SMA at $81.32. My weekly value level is $83.48, with monthly and quarterly risky levels at $88.38 and $91.97.

General Dynamics (GD) ($108.41, up 13.5% YTD): The aerospace and defense giant traded to an all-time intraday high at $113.57 on March 4. It is currently below its 21-day SMA at 108.95 and above its 50-day and 200-day SMAs at $102.93 and $90.12. The weekly chart is positive but overbought, with its five-week MMA at $105.68 in a pattern that I describe as a parabolic bubble. Annual value levels are $95.80 and $92.64, with monthly and weekly risky levels at $110.63 and $116.51.

General Electric (GE) ($25.43, down 9.2% YTD): The multi-sector conglomerate and Dow component set an multiyear intraday high at $28.09 on Dec. 31, then traded as low as $24.32 on Feb 4. It is currently above its 200-day SMA at $24.12 and below its 21-day and 50-day SMAs at $25.54 and $25.78. The weekly chart is neutral, with the stock below its five-week MMA at $25.61 with rising stochastics. My weekly value level is $24.04 with semiannual risky levels at $27.22 and $27.76.

Lockheed Martin (LMT) ($164.07, up 10.4% YTD): The aerospace and defense company set an all-time intraday high at $168.41 on Feb. 24. It is currently on the cusp of its 21-day SMA at $163.95 and above its 50-day and 200-day SMAs at $156.59 and $133.33. The weekly chart is positive but overbought, with its five-week MMA at $159.79 in a pattern I describe as a parabolic bubble. Quarterly and annual value levels are $139.65 and $135.74, with weekly and monthly risky levels at $165.01 and $173.60.

3M Company (MMM) ($132.27, down 5.7% YTD): The multi-sector conglomerate and Dow component traded to an all-time intraday high at $140.34 on Dec. 31, then traded as low as $123.61 on Feb. 3. It is currently just below its 21-day and 50-day SMAs at $132.53 and $132.69 and above its 200-day SMA at $123.39. The weekly chart is neutral, with its five-week MMA at $132.20 in a pattern that shows the stock trying to re-inflate a busted bubble. Weekly and semiannual value levels are $125.12 and $120.48, with a semiannual pivot is $130.25 and a quarterly risky level at $135.97.

Raytheon (RTN) ($100.96, up 11.3% YTD): The aerospace and defense contractor traded to an all-time intraday high at $102.15 on March 7. It is currently above its 21-day, 50-day and 200-day SMAs at $98.45, $94.32 and $81.47. The weekly chart is positive but overbought, with its five-week MMA at $97.11 in a pattern that I describe as a parabolic bubble. Quarterly and annual value levels are $86.61 and $82.01, with weekly and monthly risky levels at $103.12 and $105.54.

United Technologies (UTX) ($114.41, down 1.5% YTD): The multi-sector conglomerate and Dow component traded to an all-time intraday high at $118.42 on March 5, and is now between its 50-day SMA at $114.10 and its 21-day SMA at $115.77. The weekly chart is neutral, with its five-week MMA at $114.27 with declining stochastics in a pattern that appears like a parabolic bubble that is about to pop. Semiannual and annual value levels are $112.24 and $104.87, with a quarterly pivot at $113.70 and monthly risky level at $127.61.

Crunching the Numbers with Richard Suttmeier

There are five columns with moving average titles: Five-Week Modified Moving Average, 21-Day Simple Moving Average, 50-Day Simple Moving Average, 200-Day Simple Moving Average and the 200-Week Simple Moving Average.

The column labeled 12x3x3 Weekly Slow Stochastics shows the pattern on each weekly chart with readings from Oversold, Rising, Overbought, Declining or Flat.

Interpretations: (stocks below a moving average listed in red are below that moving average)

Five-Week Modified Moving Average (MMA) is one of two indicators that define whether or not a weekly chart profile is positive, neutral or negative. The other is the status of the 12x3x3 weekly slow stochastic.

A stock with a positive technical rating is above its five-week MMA with rising or overbought stochastics.

A stock with a negative technical rating is below its five-week MMA with declining or oversold stochastics.

A stock with a neutral technical rating has a profile that is not positive or negative.

The 200-Week Simple Moving Average (SMA) is considered a long-term technical support or resistance and as a "reversion to the mean" over a rolling three to five year horizon. (Even Apple declined to its 200-week SMA in June 2013.)

The 21-Day Simple Moving Average is a short-term technical support or resistance used by many hedge fund traders to adjust positions. A stock above its 21-day SMA will likely move higher over a rolling three to five day horizon and vice versa.

The 50-Day Simple Moving Average is also a technical support or resistance used by many strategists and commentators in financial TV.

The 200-Day Simple Moving Average is another technical support or resistance. I consider this level as a shorter-term "reversion to the mean" over a rolling six to 12 month horizon. (Even Apple tested or crossed its 200-day SMA in nine of the last 10 years.)

Value Levels, Pivots and Risky Levels are calculated based upon the last nine weekly closes (W), nine monthly closes (M), nine quarterly closes (Q), nine semiannual closes (S) and nine annual closes (A). I have one column for pivots, which is a magnet for the period shown. The columns to the left of the pivots are first and second value levels. The columns to the right of the pivots are first and second risky levels.

Investors who wish to buy a stock should use a good-until-canceled GTC limit order to buy weakness to a value level. Investors who want to sell a stock should use a GTC limit order to sell strength to a risky level.

At the time of publication the author held no positions in any of the stocks mentioned.

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff

Richard Suttmeier is the chief market strategist at ValuEngine.com. He has been a professional in the U.S. Capital Markets since 1972, transferring his engineering skills to the trading and investment world.

Suttmeier has an engineering degree from Georgia Tech and a Master of Science degree from Brooklyn Poly. He began his career in the financial services industry in 1972 trading U.S. Treasury securities in the primary dealer community. He became the first long bond trader for Bache in 1978, and formed the Government Bond Department at LF Rothschild in 1981, helping establish that firm as a primary dealer in 1986. This experience gives him the insights to be an expert on monetary policy, which he features in his newsletters, and market commentary.

Suttmeier's industry licenses include, Series 7 and Registered Principal (Series 24). He has been the Chief Market Strategist for ValuEngine.com since 2008 and often appears on financial TV.

Click here for details on Suttmeier's "Buy and Trade" investment strategy.

Richard Suttmeier can be reached at RSuttmeier@Gmail.com

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