LOCKHEED MARTIN EASING BACK AFTER A BREAKOUT – TIME TO BUY YET?

Lockheed Martin has been a true leader in the aerospace / defense sector. After making new highs in July and August, the stock has been in consolidation mode over the last two weeks. Where to next? Lockheed Martin

shares have been a multi-year leadership stock for not only the aerospace and defense sector, but also for the broader US stock market. The stock has risen from $66.87 in August of 2011 to two and a half times that share price at the highs recently. What is LMT doing that others in the sector are not – especially in an environment where military spending is supposedly on the decline? Here's what the bulls are seeing… The bulls love the technical strength on display by Lockheed Martin shares and are likely to remain in “buy the dip” mode until the long-term uptrend line is violated on the downside. The bulls also Lockheed's profit margins, cash flow numbers and the cheap price-to-sales ratio at 1.23. Here's what the bears are seeing… The bears are quick to point out that Lockheed is simply over-priced, over-leveraged and is showing no real revenue growth based on next year's estimates. The company has a price-to-book ratio of 12.73 (versus “fairly valued” at 3) and a P/E ratio of over 15 (based on next year's EPS projections) while its revenue growth is actually expected to decline and earnings are only expected to be up 7 percent. Add to the valuation problems the fact that the debt-to-equity ratio is 142.83% and you've got a nice recipe for the bears. What does the chart tell us? Technicians note that Lockheed is indeed in a strong uptrend and that dips are to be bought whenever possible. The nearest support levels for LMT shares come in at $171.36 and $168.08 – both of which are horizontal lines of support. The long-term uptrend line doesn't come into play until the $166 - $167 range. Only a break below that uptrend line would turn the focus to selling rips in LMT shares. The upside target for new longs won't come into play until the upper end of the uptrend channel – which is estimated to come into play at around $200 per share. Overall… Lockheed Martin stock is likely to be gobbled up by eager buyers unless and until the uptrend is broken.