U.S. defense stocks have been moving quite well this year. The group has outperformed the S&P 500 by a wide margin so far in 2017. General Dynamics (GD - Get Report) has been one of the laggards in the sector since early March, but that may soon change. GD is trading at new April highs Monday morning and appears to be on the verge of a breakout from its 10-week consolidation pattern. Bullish defense sector investors should put the stock on their radar screen in the near term.
Back in late January, GD exploded to the upside following a stellar fourth-quarter earnings report. The stock finished the Jan. 27 session with a 4.4% gain on its heaviest volume in 2017. This powerful move drove shares past heavy resistance near the 2016 peak. After a brief pullback, GD began a fresh rally leg that carried it up to the $194.00 as the post-election surge extended to just over 25%.
GD began to lose momentum in early March after failing to move past $194.00. The stock has been tracing out an orderly consolidation since then, while the 50-day moving average kept shares in a narrow range. This sideways action is now giving way, leaving behind a very solid support zone that runs from the $190.00 to $187.00 area. On the upside, a key hurdle will be the March highs. Once $194.00 is convincingly taken out, this A- rated stock will have room to run. On the downside, a close below $185.00 would due quite a bit of damage in the short term.
Of note, GD is scheduled to report its first-quarter results on Wednesday morning.
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