RTX Shines Amid Market Weakness

Dear Reader,

Yesterday, we looked at a Daily Price Chart for General Dynamics Corp., noting that GD shares have retraced below the upper Keltner Channel into the ‘Buy Zone’.

For today’s Trade of the Day e-letter we will be looking at a daily price chart for Raytheon Technologies Corp. stock symbol: RTX.

Before breaking down RTX’s daily chart let’s first review what products and services the company offers.

RTX Corporation, an aerospace and defense company, provides systems and services for the commercial, military, and government customers in the United States and internationally. It operates through three segments: Collins Aerospace, Pratt & Whitney, and Raytheon. The Collins Aerospace Systems segment offers aerospace and defense products, and aftermarket service solutions for civil and military aircraft manufacturers and commercial airlines, as well as regional, business, and general aviation, defense, and commercial space operations.

Now, let’s begin to break down the Daily Price chart for RTX stock.

Below is a Daily Price chart with the 50-Day EMA and 100-Day EMA for RTX.

50-Day EMA and 100-Day EMA ‘Buy’ Signal

The 50-Day Exponential Moving Average (EMA) and 100-Day EMA are moving average indicator lines that can provide buy and sell signals when used together. When the shorter-term 50-Day EMA crosses above or below the longer-term 100-Day EMA, this provides either a buy or sell signal depending on which direction the stock price is moving.

50-Day EMA line Above 100-Day EMA = Price Uptrend = Buy signal
50 Day EMA line Below 100-Day EMA = Price Downtrend = Sell signal

When the 50-Day EMA (blue line) crosses above the 100-Day EMA (red line) this indicates that the stock’s buying pressure has begun to outweigh the selling pressure signaling a ‘buy’ signal. When the 50-Day EMA crosses below the 100-Day EMA this indicates that the selling pressure has begun to outweigh the buying pressure signaling a ‘sell’ signal.

Buy RTX Stock

As the chart shows, on July 1^st, the RTX 50-Day EMA, crossed above the 100-Day EMA.

This crossover indicated the buying pressure for RTX stock exceeded the selling pressure. For this kind of crossover to occur, a stock has to be in a strong bullish trend.

Now, as you can see, the 50-Day EMA is still above the 100-Day EMA meaning the ‘buy’ signal is still in play.

As long as the 50-Day EMA remains above the 100-Day EMA, the stock is more likely to keep trading at new highs and should be purchased.

Our initial price target for RTX stock is 107.00 per share.

Profit if RTX is Up, Down or Flat

Now, since RTX’s 50-Day EMA is trading above the 100-Day EMA and will likely rally from here, let’s use the Hughes Optioneering calculator to look at the potential returns for a RTX call option spread.

For this option spread, the calculator analysis below reveals the cost of the spread is $310 (circled). The maximum risk for an option spread is the cost of the spread.

The analysis reveals that if RTX stock is flat or up at all at expiration the spread will realize a 61.3% return (circled).

And if RTX stock decreases 7.5% at option expiration, the option spread would make a 61.3% return (circled).

The prices and returns represented below were calculated based on the current stock and option pricing for RTX on 4/17/2024 before commissions.

Due to option pricing characteristics, this option spread has a ‘built in’ 61.3% profit potential when the trade was identified*.

Option spread trades can result in a higher percentage of winning trades compared to a directional option trade if you can profit when the underlying stock/ETF is up, down or flat.

A higher percentage of winning trades can give you the discipline needed to become a successful trader.

The Hughes Optioneering Team is here to help you identify profit opportunities just like this one.

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Wishing You the Best in Investing Success,