We last wrote about Lockheed Martin on January 5th when the stock was hovering around $345 a share. We thought the top at $443 in February 2020 marked the end of an impulse pattern which had been in progress since 1999. Hence, it made sense to expect more weakness ahead for the stock as its three-wave correction progresses.
Ten months later now, Lockheed is trading barely above $330 after its Q3 report included a disappointing 2022 guidance. So, it seems fair to say that the stock has gone nowhere in 2021 so far. We think this is a good time to see what is taking the bears so long and if the big picture count is still valid.
Apparently, Lockheed went nowhere this year, because the market decided to prolong wave (b) as a triangle correction. The pattern is labeled a-b-c-d-e in a contracting shape, where each wave is shorter that its predecessor. The entire triangle structure, in turn, has been preceded by a five-wave impulse in wave (a).
Lockheed Can Become an Even Bigger Bargain in 2022
So, the big picture outlook remains intact. The daily chart above suggests wave (c) has just begun. It has the potential to cause more damage as its natural targets lie below the bottom of wave (a). In other words, more weakness towards $250 a share can be expected in 2022.
On the other hand, once a correction is over, the larger trend resumes. Lockheed was clearly in an uptrend prior to its February 2020 top. With the full development of wave (c), the entire 5-3 wave cycle since 1999 would be complete. The bulls should then return and lift the stock to new records in the long term. Besides, at $250 a share, LMT would be trading at a P/E ratio below 10. That is far too cheap for the top US defense contractor.
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