GO
Loading...

Defense stocks overextended: Technician

Thursday, 8 Aug 2013 | 6:28 PM ET
Defense names overextended: Technician
Thursday, 8 Aug 2013 | 5:16 PM ET
The run-up in defense sector stocks, and two names in particular, may have run out, Carter Worth of Oppenheimer says.

The upward momentum in defense contractor stocks, and two names in particular, may have run out, technician Carter Braxton Worth of Oppenheimer said Thursday.

"Right now, we are exactly 17 percent above the 150-day moving average," he said. "That's happened 14 times, only 14, that's maybe once every year and a half in the last 25 years."

On CNBC's "Fast Money," Worth said that on a long-term chart, the defense sector has run up to the point that there was little upside left.

Once that happens, he added, the result was "invariably negative," with potential "drawdowns up to 12, 15 percent."


Debate it: Bull vs. bear on IBM
IBM fell to its lowest level of the year. "Fast Money" traders Karen Finerman and Guy Adami debate how to play the stock now.

Lockheed's stock price was also showing the same type of movement, Worth said.

"This is as far above the smoothing mechanism as it's been at any time in four, five years," he added.

Northrop Grumman also looked similar.

"The principles are the same here," Worth said.

"At this point, if you just get into mean reversion – how far above or below trend can you be before you either throw back or snap back - you're reaching outer limits of what is sustainable," he added.

Worth also said that technical analysis compelled action.

"We would say, first of all, if you're long-only and you have some big gains, you've got to take measures," he said. "And if you have the fortitude, or if you're engaged in short-selling, we think this is a good thing to be short."

By CNBC's Bruno J. Navarro. Follow him on Twitter @Bruno_J_Navarro.

Trader disclosure: On Aug. 8, 2013, the following stocks and commodities mentioned or intended to be mentioned on CNBC's "Fast Money" were owned by the "Fast Money" traders: Guy Adami is long C; Guy Adami is long GS; Guy Adami is long INTC; Guy Adami is long MSFT; Guy Adami is long AGU; Guy Adami is long NUE; Guy Adami is long BTU; Guy Adami's wife, Linda Snow, works at Merck; Brian Kelly is long Yen; Brian Kelly is long Euro; Brian Kelly is long British Pound; Brian Kelly is short US Dollar; Dan Nathan is long ZNGA; Dan Nathan is long FB Aug/Oct 38 call spread ; Dan Nathan is long JCP Aug 14 regular call spread ; Dan Nathan is short BBRY Jan 10/12 put spread; Karen Finerman is long AAPL; Karen Finerman is long BAC; Karen Finerman is long C; Karen Finerman is long JPM; Karen Finerman is long TGT; Karen Finerman is long M; Karen Finerman is long JCP; Karen Finerman is long FNP; Karen Finerman is long LYV; Karen Finerman is long IBM; Dan Telsey is long GPS; Dan Telsey is long M; Dan Telsey is long URBN; Dan Telsey is long TJX,

  Price   Change %Change
LMT
---
NOC
---

Featured

Contact Fast Money

  • Showtimes

    Halftime Report - Weekdays 12p ET
    Fast Money - Weekdays 5p ET
  • Melissa Lee is the host of CNBC's “Fast Money” and “Options Action.”

  • Scott Wapner is host of the "Fast Money Halftime Report," which airs weekdays from 12 p.m. to 1 p.m. ET.

  • Guy Adami is a contributor on CNBC's "Fast Money." He also is managing director of stockMONSTER.com.

  • Najarian, the "Pit Boss," is cofounder of optionMONSTER.com, a news site for options traders.

  • Finerman is president of Metropolitan Capital Advisors, Inc., a company she co-founded.

  • Founder of EmergingMoney.com

  • Chief Market Strategist for Virtus Investment Partners & CNBC Contributor

Halftime Report