How To Trade Boeing And 3 Other Defense Stocks Following Trump's Deal With Saudi Arabia

Disclosure: I do not own or plan to own positions in Boeing, General Dynamic, Lockheed Martin or Northrop Grumman.

Over the weekend, President Trump signed a mammoth $110 billion mutual defense deal with Saudi Arabia, which should benefit defense stocks Boeing (BA), General Dynamics (GD), Lockheed Martin (LMT) and Northrop Grumman (NOC).

These four stocks were already top year-to-date performers in anticipation that defense spending would increase under a Trump presidency. Only Dow component Boeing missed setting a fresh all-time intraday high when trading began on Monday.

Here’s a scorecard for the four defense contractors:

When looking at the weekly charts below, keep an eye on the 200-week simple moving averages shown in green. Investors should consider this level as the reversion to the mean--an investment theory that the price of a stock will eventually return to a longer-term simple moving average, and the 200-week is simple to track. A stock trading above its reversion to the mean will eventually decline back to it on weakness. Similarly, a stock trading below its reversion to the mean will eventually rebound to it on strength.

Boeing closed May 23 at $183.49, up 17.9% year-to-date and in bull market territory, 29.9% above its post-election low of $141.29 set on Nov. 8. The post-electric high of $187.20 occurred on May 9.

Boeing's weekly chart is neutral with the stock above its five-week modified moving average of $180.89. The stock is well above its 200-week simple moving average of $137.71, which is the reversion to the mean. The 12x3x3 weekly slow stochastic reading is projected to slip to 74.89 this week, down from 79.79 on May 19. Buy weakness to my annual value level of $177.45. Sell strength to my semiannual risky level of $195.90.

General Dynamics closed May 23 at $198.73, up 15.1% year-to-date and in bull market territory, 30.7% above its post-election low of 152.06 set on Nov. 8. The stock set is post-election high of $199.37 on May 23.

General Dynamics' weekly chart is positive but overbought with the stock above its five-week modified moving average of $193.63. The stock is well above its 200-week simple moving average of $135.63, which is the reversion to the mean. The 12x3x3 weekly slow stochastic reading is projected to rise to 86.50 this week, up 82.98 on May 19, moving further above the overbought threshold of 80.00.

Buy weakness to my quarterly and annual value levels $173.12 and $162.56, respectively. My semiannual pivot is $195.54. Sell strength to my monthly risky level of $203.24.

Lockheed Martin closed May 23 at $278.36, up 11.4% year-to-date and up 16.7% above its post-election low of $238.60 set on Nov. 8. The stock set its post-election high of $280.79 on May 22.

The weekly chart is neutral with the stock above its five-week modified moving average of $271.90. The stock is well above its 200-week simple moving average of $201.93, which is the reversion to the mean. The 12x3x3 weekly slow stochastic reading is projected to slip to 73.11 this week, down from 73.84 on May 19. Buy weakness to my quarterly value level of $264.79. My monthly pivot is $273.85. Sell strength to my semiannual risky level of $299.16.

Northrop Grumman closed May 23 at $250.30, up 7.6% year-to-date and up 13.4% above its post-election low of $220.72 set on Dec. 12. The stock set its post-election high of $254.00 on May 22.

The weekly chart is positive but overbought with the stock above its five-week modified moving average of $246.33. Northrop is well above its 200-week simple moving average of $169.01, which is the reversion to the mean. The 12x3x3 weekly slow stochastic reading is projected to rise to 82.84 this week, up from 81.33 on May 19. Buy weakness to my annual value level of $215.02. My quarterly pivot is $251.44. Sell strength to my semiannual risky level of $265.60.

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