Trade of the Day: iShares Dow Jones US Aerospace & Def.ETF (ITA) A Portfolio Stalwart

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iShares Dow Jones US Aerospace & Def.ETF (NYSEARCA:ITA) — This exchange-traded fund tracks the results of an index by the same name that is composed of U. S. equities in the aerospace and defense sector. The companies in the ETF include manufacturers, assemblers and distributors of aircraft and aircraft parts, makers of drones, and other highly specialized defense assemblies.

This fund receives Morningstar’s highest rating (five stars), and on Wednesday its rating by Standard & Poor’s was increased to “overweight.” Market Return Performance as of Oct. 31: Year-to-date +11.08%, three-year 11.62%, five-year 18.42%.

Top ten holdings include: Boeing Co (NYSE:BA), United Technologies Corporation (NYSE:UTX), Lockheed Martin Corporation (NYSE:LMT), Northrop Grumman Corporation (NYSE:NOC), General Dynamics Corporation (NYSE:GD), Raytheon Company (NYSE:RTN), TransDigm Group Incorporated (NYSE:TDG), Rockwell Collins, Inc. (NYSE:COL), Textron Inc. (NYSE:TXT), and L-3 Communication Holdings, Inc. (NYSE:LLL). At the current price, this ETF has an annualized dividend yield of approximately 1% with a net expense ratio of 0.44%, or $44 per $10,000 invested annually.

After the Brexit plunge in June, ITA rallied to a new all-time closing high on Aug. 15 at $132.73. However, a combination of profit-taking and the government’s projection of less defense spending caused a gradual decline to a triple bottom along the bullish support line. The final, and successful, test of the line occurred this week, when the ETF jumped from its support, cutting through the 50-day moving average (blue line) and on Wednesday closing at a new all-time high. That high was extended on Thursday, again with extremely high volume.

However, two back-to-back high-volume days are often the sign of institutions’ covering of short-sales. If I am correct, the stock could pull back and attempt to close the open gap, the mid-point of which is about $132. Thus, buyers should wait to see if new money can drive the stock higher, or the lack of short-covering drops the stock to the open gap at $131 to $132.50. Either way ITA should be purchased as a long-term hold.

ITA B $132 HOLD
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Trade of the Day: iShares Dow Jones US Aerospace & Def.ETF (ITA) A Portfolio Stalwart


Article printed from InvestorPlace Media, https://investorplace.com/2016/11/trade-day-ita-aerospace-ipmedia/.

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