We Saw a Rejection at Gap Resistance Several Times. Will We See it Again?

KTOS was one of the strongest performers last week. The company had an especially bullish day on Friday with an over 9% move to the upside. This included a huge gap up in price during premarket thanks to a hefty price upgrade.

This puts KTOS's price back into the gap resistance zone that I mentioned in my previous comments about the company. You can check out my previous comments in the link directly below.

In my previous post, I mentioned how we might see resistance near that gap in price. Indeed, we did see strong resistance as the price rejected the technical level and fell back down to the previous support zone before rebounding once again.

If you had traded the range, then you would be sitting in some nice profit right now. You could have sold or went short at resistance and then bought or went long at support. This would have somewhat mimiced the options strategy called the wheel method.

Right now, the price is currently sitting within the gap resistance zone, where the price has met a strong sell-off several times in the recent past. Will the price reject resistance once more and stay within the price range that I mentioned?

Now, the technical picture looks a little different than it did when we saw the price reject gap resistance in the past. It possibly looks like a better buying opportunity based on the KDJ, RSI, and MACD indicators.

The price upgrade brought in a lot of volume on Friday. The big volume candle could be a sign of confirmation towards Friday's bullishness. Also, RSI has just moved into bullish territory while KDJ is near oversold territory. This tells me that the faster oscillators are saying the very short-term price action is ready for a possible rebound. But of course, you can not solely rely on indicators. So, let's see how the price action looks.

The big volume candle coincided with a big gap up in premarket and a breakout above a long-term Fibonacci level. We also saw Fridays candle open and close above the Fib level. All of this looks bullish, in my opinion. The only thing that worries me is the fact that the price has had so much trouble climbing above the gap resistance in the past.

If I see a little more upside, then I will strongly consider entering into a swing trade to ride the price up the next Fib level, which resides near the previous 52-week highs.

If we do see more upside, then I will be watching for potential confirmation of this long-term bearish price channel. The upper resistance line of this channel is undefined as of right now. But if we see the price reject this potential long-term resiatance zone, then the technical picture would look much more bearish. I would watch this level with caution if you are swing trading this ticker.

The short-term technical picture is starting to look a bit more bullish than it has been over the past several weeks. But the longer-term picture has yet to produce higher highs.

In the short-term, an entry for a profitable swing trade looks very appealing. The longer-term picture looks more sketchy as it shows the price consolidating near 52-week highs at a potential downward resistance line of a potential price channel. If I see a rejection of this potential downward resistance line, then the long-term downward price channel will recieve confirmation. I would likely exit my bullish short-term thesis at that point. I might even look for short positions.

With all of this technical data available, we still must consider the current geopolitical situation in the world. If Hamas and Isreal and/or Ukraine and Russia continue with their current conflicts, then this will keep the upward pressure in the military industrial tickers. If there is any alleviation in either conflict, then that will likely take away some of the upward force in a lot of these aerospace and defense companies. We might see some investors covering long positions at that point.

Remember that Congress has just recently passed an additional bill to fund these conflicts further. They didn't do this because they think that the conflicts were about to end. This money will undoubtedly make its way to some companies within the military industry, like KTOS. The only question at this point is, has the market already priced in this funding round?

As always, I am not a financial professional, and this is not investment advice. Be careful and be patient. Dont anticipate the market. Rather, participate in the market. Don't invest money that you can't afford to lose. Give some of your investments time and know when to cut your losses.   

Don't be greedy. Don't invest in anything you don't understand. Don't put all of your eggs in one basket. Don't listen to the hype. Don't fomo or panic into or out of trades. Do your own due diligence. And just follow the trends. A trend is your friend. Good luck trading.