Which Level Will This Defense Stock Break First?

Kratos Defense & Security Solutions, Inc. provides mission critical products, services and solutions for United States national security priorities. Its products include microwave electronic products, satellite communications, modular systems, and rocket support operating. 

Take a look at the 6-month chart of Kratos (KTOS) below with the added notations:

Chart of KTOS provided by TradingView

Over the past several months, KTOS has been declining against a trendline of resistance (red). More recently, the stock has also created an important support level at $9 (green). At some point, KTOS will have to break one of those two lines, and that break will likely dictate the next major move for the stock.

The Tale of the Tape: KTOS is trading between key support and trendline resistance. A break of support could be an opportunity to get short, while a break of resistance might give traders a chance to get long.

Before making any trading decision, decide which side of the trade you believe gives you the highest probability of success. Do you prefer the short side of the market, long side, or do you want to be in the market at all? If you haven’t thought about it, review the overall indices themselves. For example, take a look at the S&P 500. Is it trending higher or lower? Has it recently broken through a key resistance or support level? Making these decisions ahead of time will help you decide which side of the trade you believe gives you the best opportunities.

No matter what your strategy or when you decide to enter, always remember to use protective stops and you’ll be around for the next trade. Capital preservation is always key…

Good luck!

Christian Tharp, CMT