Lockheed Martin (NYSE 🙂 ended a two-day rally down 1.5% after China said it will sanction the company and others over arms sales to Taiwan.
However, it is unclear how much such a move could affect the aerospace and defense company, as 68% of Chinese weapons come from Russia and the rest are spread between France and Ukraine – not from Lockheed Martin.
In any case, Taiwan is the major customer of Lockheed Martin products, with a history of more than 30 years as a customer. Moreover, this development is also part of the US-China trade war, so we can reasonably expect the US to support the company.
So while we don't see any reason for a long-term impact on Lockheed Martin, traders may sell it in the short term as a reaction with a shock.
The 1.5% selloff yesterday confirmed the integrity of a complex H&S neckline, showing that supply and demand has turned.
The RSI gave traders a head start after causing a negative divergence in price, which fell while the price rose.
Trading Strategies
Conservative traders are likely to be waiting for evidence that the bear took over with yesterday's settlement hammer low, on lock basis, with a filter around a bear trap at least 3 days under $ 362, preferably including a weekend. After that, they would wait for another test to find resistance, as the final confirmation of a short-term downtrend.
Moderate traders would be satisfied with a closing price of less than $ 360 for two days and then they too could wait for a move back for better access, if not for additional bearish confirmation.
Aggressive traders can now go short, or wait for the possible bounce after yesterday's hammer, for an entry closer to the pattern's supposed resistance.
Here's an example:
Trade Sample
Entry: $ 375
SL: $ 380
Risk: $ 5
Target: $ 350
Reward: $ 25
RRR: 1: 5
Author's Note: This is a trade sample, which by definition means one approach, but as with everything else, there is not just one real way to approach this trade. The above example is only intended to illustrate the necessary requirements for a coherent basic plan. If you don't have one that you stick to that reflects your timing, account, and temperament, you don't act. You gamble. Good trade!
