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Trade of the Day: L3 Technologies Inc Is Breaking Out

L3 Technologies Inc (NYSE:LLL), which among other defense-oriented products makes airplane cockpit displays, on Nov. 20 saw its shares awake from a two-month hiatus. The 2.6% rally on the charts of LLL stock resulted in a classic breakout move from a bullish consolidation phase, which now, barring any quick bearish reversal, favors a continuation move higher toward a defined next upside target.

LLL Stock: L3 Technologies Inc Is Breaking Out

LLL stock for the year-to-date is up about 25% and higher by about 80% if one measures the move off the early 2016 lows.

In other words, through the lens of trend following this has been a great ride for the bulls and barring a notable change in winds this for now is one stock I would not want to get caught on the short side of.

LLL Stock Charts

Click to Enlarge

Moving averages legend: red – 200 week, blue – 100 week, yellow – 50 week

To put some perspective around the multiyear move, let’s pull up the weekly chart. Here we see that as the stock roughly re-tested its red 200-week simple moving average in October 2015 and early 2016, a strong rally emerged that has since held above the yellow 50-week (roughly equal to the 200-day) moving average.

At the same time, the move now also allows us to draw a very defined support line, a break below which would likely signal a shift in at least near-to-medium-term posturing for the stock.

If we however take the entire rally since 2012 into account, we can also see that LLL stock is now at an increasingly tight spot where the potential for further upside at this rate through the intermediate to longer term lens is difficult at best.

Click to Enlarge

Moving averages legend: red – 200 day, blue – 100 day, yellow – 50 day

Moving on to the daily chart, we can draw a nice up-trend line connecting the lows since November 2016. After getting extended on the upside in mid-September LLL stock fell into a consolidation phase that we could label as a so called “bull flag pattern.” Monday’s rally led to a marginal breakout to the upside of this pattern and thus a potential next leg higher, albeit likely not in a straight shot.

Barring a sudden and meaningful bearish reversal LLL stock could now start moving toward a next round and juicy upside target around the $200 mark. A last resort stop loss could be set around $183 for now.

Check out Anthony Mirhaydari’s Daily Market Outlook for Nov. 21.

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