Raytheon Company (RTN) had an excellent day on Monday, gaining 1.3% after it was awarded a new contract with the Federal Aviation Administration worth $131 million and on the heels of two positive research reports. Analysts at Credit Suisse reiterated their “outperform” rating on RTN stock ($107 price target) on Friday, as did analysts at RBC Capital ($115 price target).
On Oct. 27, RTN closed at $99.37, and the Profit Scanner powered by Recognia identified a bullish Symmetrical Continuation Triangle pattern in its chart that should take the shares to $107-$109. The pattern duration was 19 trading days, meaning that Raytheon should make its move in the short term, for a gain of about 8%-10%.
Simply put, the Symmetrical Continuation Triangle occurs when the price has broken upward out of a consolidation period, suggesting that the prior uptrend will continue. As you can see in the RTN chart below, it consists of two converging trendlines created from lower highs and higher lows, with diminishing volume in an ever-narrower range. Then before the triangle’s apex, the pattern is confirmed when the stock breaks out on a noticeable volume increase.
One way to confirm the pattern is to check whether the stock has crossed a key resistance level; as you can see, Raytheon has now overtaken both the 200-day and the 50-day moving averages, supporting the idea that its shares will see further upside. Be aware, however, that the Profit Scanner sees another resistance level at $101.05; more conservative traders may wish to see RTN overtake that price before entering a bullish trade. Support is down at $96.58, and the Profit Scanner places a tight stop a few cents below, at a close under $96.51.
Those looking for a cheaper way to trade Raytheon should take a look at its robust options chain. The in-the-money option, RTN Nov. $100 call, is going for around $2.20 (3,192 open interest), and more aggressive traders could also consider the RTN Nov. $105 call, currently trading around $0.28 (1,082 open interest). Both options have the potential for big gains should RTN reach the Profit Scanner’s short-term target range of $107-$109.
Profit Scanner powered by Recognia can help traders of all levels uncover these signals to determine the best timing to buy. Or use Profit Scanner’s technical insight to validate your own trading ideas. See how easy this powerful tool is to help you uncover hidden opportunities in the market.
