NOC Stock: Bullish Until It’s Not
The markets have changed, and the spike in both interest rates and volatility that occurred earlier this year was the catalyst for this change. This market was geared to passive investors because the markets were forging new highs on a daily basis. These consistent highs created a rising tide that was lifting all stock.
These highs have ceased and, with them, the tide has gone out. As a result, this market is now geared to stock pickers who can distinguish between good investments and bad ones.
As a stock picker, I try to distinguish good stocks from bad ones by analyzing companies’ stock charts. This method of investment analysis is called technical analysis, and I am proud to say that I have spent nearly two decades dedicating myself to this craft.
I am currently focusing on Northrop Grumman Corporation (NYSE:NOC) because Northrop Grumman stock is on the verge of forging a new all-time high. In this market environment, that is quite a feat, but this is not what caught my eye.
What really stands out about NOC stock is that the recent run toward higher stock prices has been accompanied by a number of embedded technical indicators.
Since the middle of last year, these indicators have been implying that the path of least resistance is toward higher prices. An embedded indicator is very significant because, as long as these technical indicators remain embedded, higher NOC stock prices should prevail.
The first embedded indicator is highlighted on the following Northrop Grumman stock chart.
Chart courtesy of StockCharts.com
The indicator highlighted on this NOC stock chart is the 50-day moving average.
The 50-day moving average is created by averaging the stock’s closing price over the last 50 days and plotting that value on the stock chart. This moving average is used to determine the technical health of a stock within an advance.
This Northrop Grumman stock chart clearly illustrates that the 50-day moving average has become a significant level of price support. Any time this metric has been tested over the past year, buyers have been quick to step in and support NOC stock.
The sheer number of times the 50-day moving average has acted as a level of price support is a testament to its significance and, as long as the stock price remains above this moving average, I can only assume that higher prices will prevail.
NOC stock has been using the 50-day moving average as support since last April, which is how long the moving average convergence/divergence (MACD) indicator has been in bullish alignment.
The MACD indicator is highlighted on the following Northrop Grumman stock chart.
Chart courtesy of TradingView.com
This NOC stock chart highlights the significance of the MACD indicator.
MACD is a momentum indicator that is used to determine whether bullish or bearish momentum is influencing the price action in a stock. Bullish momentum implies that a stock is geared toward higher prices and bearish momentum implies that a stock is geared toward lower prices.
This indicator is very influential because a stock cannot sustain a move in either direction unless the applicable momentum is supporting it.
In May 2017, a bullish MACD cross was generated, and it has remained in bullish alignment ever since. There have been two attempts at negating this bullish MACD signal and each time, a bearish MACD cross was averted.
The inability to generate a bearish MACD cross is a testament to the inherent strength that is fueling this bullish advance in NOC stock.
As long as the MACD indicator remains in bullish alignment, the bullish advance toward higher Northrop Grumman stock prices should continue. Only when a bearish MACD cross is generated would I expect lower prices to prevail.
The bullish advance in Northrop Grumman stock has been supported by embedded bullish signals generated by the 50-day moving average and the MACD indicator. I believe that the current trend toward higher NOC stock prices will remain intact for as long as these indications remain in bullish alignment.
The current volatile market environment is conducive to lower stock prices. So, as a result, I am bullish on this investment until a bearish signal is generated by either the 50-day moving average or the MACD indicator, at which point I won’t hesitate to change my stance.