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This post was written by Minyanville contributor Fil Zucchi.To highlight defense names in the face of the current spending priorities feels like soaking in gasoline and walking around smoking a cigarette. With that visual as a backdrop, it is also fair to say that Obama is probably just as focused on protecting the motherland as Bush was, and, much as he may dislike it, that will force continued if not increased spending in certain areas of defense. The one name I have been drooling over for years and which is finally coming together in many respects is L-3 Communication (NYSE: LLL).
The company continues to earn lots and lots of money and its cash generation is even higher. Yes, it has a fair amount of debt, but none that matures before 2012 and all of it trades strong. I won't bother you with more valuation stuff other than to say the stock is dirt cheap. Of course I could have been making that argument for the last $15. What's more important is picking when the selling in LLL (and the group in general) may exhaust.
Enter some very interesting DeMark charts:
On a daily basis, we are on bar 9 (out of 13) of a TD Sequential Buy setup. Down Exhaustion level is at $56.72 and TD 50% Absolute Retracement from the all time highs is also at $56.72. $58.38 is the "line in the sand" to determine whether the stock is completing a TD Wave 2 and from an oscillator standpoint, the stock is beyond very oversold.
On a weekly basis, we are on bar 12 (out of 13) of a TD Sequential Buy setup. Down Exhaustion is at $52.56 and 50% Abs. Retracement from the all time highs is at $55.95. That pattern too is deeply oversold.
Bottom line? There are lots of potential reasons to look at LLL from the long side, with all kinds of nearby exit levels available.
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Reader Comments (Page 1 of 1)
3-05-2009 @ 6:06PM
Tim said...
I would look more at SAIC than L3. SAIC has a hand in everything, and I mean everything. L3 has a narrower contract base, and has lost some major contracts the past few years, which they had held for years.