Raytheon Stock: Set To Soar (NYSE:RTX)

By Levi at StockWaves; produced with Avi Gilburt

Where Technicals And Fundamentals Align

We highlight the highest-probability investment opportunities where technicals and fundamentals align. Raytheon Technologies (NYSE:RTX) is one of 22 Mega-Cap stocks that we identified in mid-November of last year with the potential to strike a new all-time high in 2023.

When it comes to fundamental analysis, Lyn’s deep dives on individual stocks are second to none. Blending a background in engineering and finance, Lyn digs for value with a dispassionate, scientific approach that has been uncannily accurate in forecasting stock moves and trends.

We recently posted our updated technical view of RTX for our members, to which she has added her current snapshot and commentary. Please see below:

“RTX looks pretty attractive from a fundamental standpoint. Once technicals show signs of a bottom, it would be an interesting opportunity to look at, in my view.

The company makes aerospace products for both military and commercial aviation applications. The last few years were obviously difficult for the commercial aviation side, but that is firmly in recovery mode now. The military side benefits from massive US military spending, and with the recent geopolitical conflicts, many U.S. allies are increasing their military spending as well.”

How Do You Know When To Sell?

That’s a bit more of an involved discussion. And while there are many possible responses, the answer we truly seek is, “How do I know when the trend may end?”. We will provide our current viewpoint and target and then share how we arrived at this position.

The low struck near the end of September of last year is being viewed as key and pivotal for the near term. From that low, we are projecting as high as the $140 area to be the ultimate target, perhaps even sometime in this calendar year.

How do we arrive at that price target? For those familiar with our methodology, you will recognize the attached charts as Elliott Wave theory analysis. It’s clearly important that this theory be correctly applied. As well, there must be a way to remove the potential subjectivity inherent in humans.

Fibonacci Pinball

Please take the requisite 5 minutes or so and read through the information to follow. Ask yourself: Are markets logical, linear, and reasonable systems? Or, are they pushed, prodded and impelled by emotions? If you are willing to accept that markets are primarily moved by sentiment, then allow us to present a bit more research to further frame that.

In a paper entitled “Large Financial Crashes,” published in 1997 in Physica A, a publication of the European Physical Society, the authors, within their conclusions, present a nice summation for the overall herding phenomena within financial markets:

“Stock markets are fascinating structures with analogies to what is arguably the most complex dynamical system found in natural sciences, i.e., the human mind. Instead of the usual interpretation of the Efficient Market Hypothesis in which traders extract and incorporate consciously (by their action) all information contained in market prices, we propose that the market as a whole can exhibit an “emergent” behavior not shared by any of its constituents. In other words, we have in mind the process of the emergence of intelligent behavior at a macroscopic scale that individuals at the microscopic scales have no idea of. This process has been discussed in biology for instance in the animal populations such as ant colonies or in connection with the emergence of consciousness.”

OK, so what do ants have to do with investing? Remember, we are talking about crowd behavior. This herding mentality moves in patterns. These patterns are repeatable and therefore predictable. But, recall the issue with inherent subjectivity.

Fibonacci Pinball is a way to standardize our approach to markets. It is a framework that can be overlaid upon Elliott Wave theory and mitigate to a great degree said subjectivity. Now, remember that this is a standardized method that is a most common phenomenon in the market, but markets can and do vary from this standardized presentation.

Applying Pinball To RTX

To boil this down to actionable analysis, first, note that we anticipate the next high strike in RTX to be the end of this current uptrend that has existed for some years. That high should complete via a 5-wave structure. Wave [3] completed near the 1.236 extension of the initial waves [1]-[2] up from the March 2020 low.

Wave [4] then came back down to the .764 extension of that initial [1]-[2] up. We see this as having started wave [5] and have the most likely target as near the 1.618 extension at $139.

Once this new high in price is struck, we find it probable that a lengthy and protracted pullback will set in, perhaps for several months or even years as RTX consolidates the bullish trend that has existed.

Risks

Should RTX move back below that low struck in Sept 2022 at the $80 level, then this scenario as presented in this article would require revision. As well, obviously, there would be company-specific risks and then overall market sentiment, which can change.

I would like to take this opportunity to remind you that we provide our perspective by ranking probabilistic market movements based upon the structure of the market price action. And if we maintain a certain primary perspective as to how the market will move next, and the market breaks that pattern, it clearly tells us that we were wrong in our initial assessment. But here’s the most important part of the analysis: We also provide you with an alternative perspective at the same time we provide you with our primary expectation, and let you know when to adopt that alternative perspective before it happens.

There are many ways to analyze and track stocks and the market they form. Some are more consistent than others. For us, this method has proved the most reliable and keeps us on the right side of the trade much more often than not. Nothing is perfect in this world, but for those looking to open their eyes to a new universe of trading and investing, why not consider studying this further? It may just be one of the most illuminating projects you undertake.